Do As I Say, Not As I Do

Strauss, Amazon projects force local competition questions

“I’m told there was an informal agreement that no municipality would poach from each other,” Franklin Mayor Steve Olson told the Milwaukee Business Journal. “I’m not sure that’s the case any more.”

That's rich. Suburbs, like Franklin, exist because of poaching.  Suburbs were happy to offer 'economic incentives' to attract formerly good paying jobs and companies away from the central city.  Now that cities are seeing a resurgence and can compete, the suburbs are pretending this (economic development incentives) is some new occurrence.  Perfectly fine when they do it ... but when it happens to them, not so much.

For Further Reading:
Corporate Tax Breaks
Failure of Economic Development Incentives
Grading Places
Industrial Incentives
Rethinking Growth Strategies
Tax and Spending Incentives and Enterprise Zones
The Great American Jobs Scam

Ending The War Among The States

Economic Development, Tax Incentives and The Plutocracy It's Creating

Job Piracy

Blackmailed Into Oblivion

Legalized Bribery

Buying Jobs

Weekend Reading

Why And How Capitalism Needs To Be Reformed
The IRS Tried To Take On The Ultrawealthy. It Didn't Go Well.
The Tax Law's Big Winner Is The Millionaire CEO
Bernie Sanders's Fox News Town Hall Wasn't A Debate. Bernie Won Anyway.
Warren Has A Good Beginning For Ending Corporate Tax Avoidance
The Truth About U.S. Taxes Is That They Aren't High Enough
Yes, Graceland Actually Threatened To Move To Japan To Get $194 Million In Subsidies From Memphis
Ending The Economic War Among The States: A Strategic Proposal
Amazon's Next Frontier: Your City's Purchasing
The Undemocratic Making Of Indianapolis
The Future Of Unions Is White-Collar
Fun Fictions In Economics

Amazippi

Ticked Off About TIFs

I'm typically not a fan of the conservative Wisconsin Institute for Law and Liberty (WILL). They're usually the initiators of some harebrained legislation, lawsuit or legal opinion promoting freedom whilst railing against big, bad government. But we really do need more people paying attention to the corporate welfare and subsidies being lavished on private entities through economic development incentives.

So, good for WILL filing a lawsuit on behalf of some Eau Claire taxpayers who say the city abused Wisconsin's tax incremental financing law that includes cash payments to a private developer or company.

The lawsuit argues that the $1.5 million in direct payments and half of the redevelopment payment for the Confluence Project are an illegal property tax rebate for the property owner. That could violate the state Constitution, which says property taxes must be assessed in a uniform manner, said Rick Esenberg, the lawyer for the plaintiffs in the case.

Here's how I described TIFs back in 2008:

Another much touted, yet becoming more so destructive, policy tool is tax incremental financing (TIF). These were initially established to bring investment to blighted, low-income areas. But nowadays, more states are loosening their eligibility requirements and allowing affluent areas to reap the benefits. TIFs allow a municipality to issue a bond to pay for part of the costs of the new development. The property tax revenue generated by the development is then used to pay off the bonds. Some municipalities also allow sales tax increments, where the sales tax generated by the new development can be diverted to redevelopment costs.

In essence, using taxpayer money (cheap credit from a municipality) to finance speculative development where the rewards benefit the usual cast of characters at the expense of the community at large.

WILL's lawsuit is a step in the right direction, but this needs to be passed at the federal level. Otherwise it becomes a local competitive disadvantage. We would be legally prohibited from bribing companies, while other states and cities still would be able to participate in the current economic development blackmail dance.

For Further Reading:
TIFs, Greenfields, and Sprawl
Subsidizing Sprawl, Subsidizing Walmart
Straying From Good Intentions
Shifting The Burden
Recession Shriveling TIF Revenue Returns
Property Tax Abatements and Your School
Legislation Introduced to Help Troubled TIFs

The Job Creation Shell Game

Economic Development, Tax Incentives and The Plutocracy It's Creating

The Job Creation Shell Game

The Job Creation Shell Game

State and local governments waste billions of dollars each year on economic development subsidies given to companies for moving existing jobs from one state to another rather than focusing on the creation of truly new positions, according to a study released today by Good Jobs First, a non-profit, nonpartisan research center based in Washington, DC.

“What was long ago dubbed a Second War Between the States is, unfortunately, raging again in many parts of the country,” said Greg LeRoy, executive director of Good Jobs First and principal author of the report. “The result is a vast waste of taxpayer funds, paying for the geographic reshuffling of existing jobs rather than new business activity. By pretending that these jobs are new, public officials and the recipient companies engage in what amounts to interstate job fraud.”

Interstate job piracy is not a fruitful strategy for economic growth, LeRoy noted: “The costs are high and the benefits are low, since a tiny number of companies get huge subsidies for moving what amounts to an insignificant number of jobs.” LeRoy added: “The flip side is job blackmail: the availability of relocation subsidies makes it possible
for companies that have no intention of moving to extract payoffs from their home states to stay put.”

Summarizing studies demonstrating that interstate job relocations have microscopic effects on state economies, the report reviews the history of economic competition among the states and presents eight case studies of those areas of the country where job piracy is currently most pronounced.

Poaching Is Bad, But It Looks Great On A Résumé

I generally like the work of the Public Policy Forum. Although, I've had issues with some of their analysis, overall they seem to do a good job presenting useful data.

But this is more about the presentation of ideas by the Journal Sentinel.

A recent article by John Schmid - Milwaukee's 'poised for vibrancy,' Public Policy Forum leader says - celebrated the new Public Policy Forum leader for doing the exact thing that a recent Journal Sentinel editorial preached against.

When Milwaukee set out in 2005 to create a new economic development framework, its business leaders began by poaching ideas from Chicago, which had worked successfully to lure the Boeing Co.'s headquarters away from Seattle only a few years earlier. 

In doing so, the Milwaukee 7 — as the seven-county economic strategy agency went on to name itself — appropriated a few key concepts from Virginia Carlson, the founding director of research at the more established World Business Chicago and part of the team behind the Boeing coup.

On July 30, 2013 the Journal editorialized, Governors Should Swear Off Poaching.

Poaching. That's the counterproductive, and sometimes costly, practice of trying to lure jobs across state lines.

Too many governors, including Wisconsin's Scott Walker early in his administration, seem to think that it works. It doesn't. Companies rarely move because of government incentives — and even when they do, it's a zero-sum game that does nothing to make the economic pie larger.

So, poaching is costly, counterproductive, and does nothing to grow the economic pie. Yet, it is also somehow a meaningful feather in the cap of the Public Policy Forum's new director.

Interstate Job Fraud

State and local governments waste billions of dollars each year on economic development subsidies given to companies for moving existing jobs from one state to another rather than focusing on the creation of truly new positions, according to a study released today by Good Jobs First, a non-profit, nonpartisan research center based in Washington, DC. 

“What was long ago dubbed a Second War Between the States is, unfortunately, raging again in many parts of the country,” said Greg LeRoy, executive director of Good Jobs First and principal author of the report. “The result is a vast waste of taxpayer funds, paying for the geographic reshuffling of existing jobs rather than new business activity. By pretending that these jobs are new, public officials and the recipient companies engage in what amounts to interstate job fraud.” [Study: States Waste Billions Luring Jobs from Each Other]

Good Jobs First report, The Job Creation Shell Game:

This study describes how state and local governments waste billions of dollars each year on economic development subsidies given to companies for moving existing jobs from one state to another rather. It also looks at how the existence of relocation subsidies emboldens some large companies to demand large job blackmail subsidies to stay put. The report offers policy recommendations to address the problem.

For more on wasteful corporate subsidies, see Good Jobs First's Paying Taxes To The Boss:

As Americans file their state income tax returns this month, some may dislike paying taxes but most take heart from the fact that their dollars support public schools and colleges, roads and transit, health care and public safety. However, for some people, the personal income taxes they see deducted from their paychecks aren’t supporting public services. Indeed, this is true for workers at more than 2,700 companies in 16 states. 

Nearly $700 million is getting diverted each year. And it is very unlikely that the affected workers are aware, given that no state requires that the diversion be disclosed on pay stubs.  

Where is the money going? To the employers of those workers. A growing number of states are diverting revenue traditionally devoted to funding essential government services to pay for lavish subsidy awards to corporations for job creation or sometimes simply job retention. The practice of redirecting large portions of the state personal income tax (PIT) withholding deducted from paychecks means many workers are, in effect, paying taxes to their boss. 

Along with the worker deception, many of the programs are entwined with two of the most controversial practices in economic development: the economic war among the states and job blackmail. Many PIT diversions are paying corporations to simply relocate existing jobs from one state to another; others are used by states when they capitulate to companies that threaten to move to another state.

Bradley Center Boosters Keep Pounding That Drum

Sheehy Plans Task Force To Study New Arena

Don Walker begins the article stating, "By mid-2014, the community needs to have a good idea of what role the private and public sectors will play in the construction of a new, multipurpose arena in Milwaukee."

We hear tales about the omnipotent private sector and free market...so efficient, so perfect.

Simultaneously, we're also told how the government is wasteful, full of slackers, and just can't do anything right.

Yet (for some reason) the inefficient, know-nothing government needs to play a major role in the planning and funding of private sector activities.

Enter sport stadiums. These privately controlled initiatives are (supposedly) such game changers, job creators, catalysts, no-brainers. [They're not.] But, again, for some unexplainable reason, the inept public sector needs to invest heavily and absorb most of the risk.

Living wages, universal health care, pensions, unemployment insurance, Medicare, Social Security - that's just a bunch of welfare for moochers. But corporate welfare - such as the public sector picking up most of the tab to build teams new stadiums - is just good policy?

The question should be - why is the public sector involved, at all, in the financing of these private sector playgrounds? If Herb Kohl and the Bucks want a new stadium, go ahead and build one. But the public shouldn't have to shoulder most of the cost.

Where does such a corporate welfare policy end? This misguided corporate welfare is why we now must pay blackmail money to Harley-Davidson and Mercury Marine when they threaten to take jobs away.

If the public is now responsible for the cost of building private businesses, shouldn't the public have a greater say in the operation - the pay scales, the retirement plans, the health care options, the environmental footprint, etc.? If the public sector is a necessary partner in construction, financing, and maintaining the viability of a business, shouldn't they have a representative voice in the organization making sure the public is getting back a fair return on their investment?

For Further Reading:
Basket Case 
Buck The System
Buck You 
Economic Engine Or Albatross?
Is There Anything A Stadium Can't Solve?
Overblown Bradley Center Impacts
Stadium Swindle
Will Herb Kohl Blackmail Milwaukee?