Competition is at the heart of America’s economic success, but not every type of contest benefits society. Consider the growing trend of businesses cajoling states and politicians to compete for who can dole out the most corporate welfare. It’s especially frustrating because there are already plenty of ways to promote job growth without robbing taxpayers.
General Electric is one of the latest companies to shamelessly demand taxpayer-funded goodies from government. The company’s senior tax counsel Bobby Burgner spoke freely about the firm’s strategy earlier this month at a panel hosted by the National Bureau of Economic Research. Mr. Burgner declared that GE would generally avoid states with congressional delegations opposed to federal-subsidy programs like the Export-Import Bank, which hands out taxpayer-backed loans and guarantees to businesses like GE. This followed the company’s refusal last summer to relocate its headquarters to Dallas, because some prominent Texas lawmakers opposed reauthorizing the bank.
Increasingly, major companies determine where to maintain, expand or relocate facilities based on how much money they can take from taxpayers’ pockets in the process. They sometimes hold jobs and entire communities hostage until they get their way.
And taxpayers are the losers.
The most frequent tactic is to demand tax credits or direct subsidies from state governments. In 2010 John Deere secured $15 million from Iowa to maintain roughly 300 jobs at a Waterloo plant. A year later in neighboring Illinois, Sears and the Chicago Mercantile Exchange Group threatened to relocate their headquarters unless the state forked over about $100 million in tax breaks. General Electric was in on the game as early as 2010 when it sought $25 million in tax credits from Massachusetts to maintain 150 local jobs.
That’s around $150,000 per job subsidy!
And then there’s Boeing. In 2013, the company, which assembles jetliners in the world’s largest building in Everett, Wash., announced that it was looking for a location to build its new 777X. This spurred a furious scramble by multiple states to win the company’s favor. Although most kept their bids under wraps, Missouri tried to tip the scales by passing a bill containing $1.7 billion in tax incentives.
That still wasn’t enough, and Boeing decided to stay in Washington. The price? An $8.7 billion package, the largest such giveaway in American history, that included tax breaks on airplane production, a sales-and-use tax exemption for new buildings and taxpayer-funded training for employees.
Imagine if all the states refused to play the game, and the decision would then be based on location not welfare. And taxpayers would have saved $9 billion.