Autumn on Lake Thoreau

Autumn on Lake Thoreau

Thursday, December 27, 2012

As Companies Seek Tax Deals, Governments Pay High Price, New York Times, December 1, 2012

As the Fairfax County Board of Supervisors takes on the issue of added taxes in Tysons early in the new year, it is useful to put the issue of corporate tax incentives in perspective.  In the Tysons case, the Board is reviewing a proposal by the the County's Reinvestment Board to create a Tysons transportation service tax district to cover the $5 billion needed over the next 40 years to pay for Silver-Line development-linked roads and public transit there.  The tax would add about a eight percent to the tax bills of Tysons homeowners and a similar amount to the bills of landowners/developers there. 

As Reston 2020 and the RCA Board of Directors have stated previously, it is unfair to force residential taxpayers to pay additional taxes from which they will garner no offsetting income while subsidizing corporations.  Developers/landowners can anticipate huge profit increases from tripling or more their development in Tysons--and passing on any added tax costs to their clients, renters, and buyers.  Residents have no such opportunity.    

And this does not include tax incentives routinely provided by Fairfax County and Virginia to induce companies to move to northern Virginia.   And, of course, every inducement given to a company to re-locate here--including Intelsat's recent decision to move to Tysons after receiving a $1.3 million grant from the Governor's Opportunity Fund--means that residents of those jurisdictions must dig more deeply to cover the costs of providing infrastructure and other services for their new corporate neighbors.

In this NYT article, Louise Story reveals the scope of those subsidies and how, in the end,  they are largely feckless on a larger-scale basis.  Here's how her story begins:
In the end, the money that towns across America gave General Motors did not matter.
When the automaker released a list of factories it was closing during bankruptcy three years ago, communities that had considered themselves G.M.’s business partners were among the targets.
For years, mayors and governors anxious about local jobs had agreed to G.M.’s demands for cash rewards, free buildings, worker training and lucrative tax breaks. As late as 2007, the company was telling local officials that these sorts of incentives would “further G.M.’s strong relationship” with them and be a “win/win situation,” according to town council notes from one Michigan community.
Yet at least 50 properties on the 2009 liquidation list were in towns and states that had awarded incentives, adding up to billions in taxpayer dollars, according to data compiled by The New York Times. . . .
Later in her article, she notes the nationwide nature of this ill-advised and unfair tax subsidy policy:
 The Times analyzed more than 150,000 awards and created a searchable database of incentive spending. The survey was supplemented by interviews with more than 100 officials in government and business organizations as well as corporate executives and consultants.
A portrait arises of mayors and governors who are desperate to create jobs, outmatched by multinational corporations and short on tools to fact-check what companies tell them. Many of the officials said they feared that companies would move jobs overseas if they did not get subsidies in the United States.
Over the years, corporations have increasingly exploited that fear, creating a high-stakes bazaar where they pit local officials against one another to get the most lucrative packages. States compete with other states, cities compete with surrounding suburbs, and even small towns have entered the race with the goal of defeating their neighbors. . . .
 . . . For local governments, incentives have become the cost of doing business with almost every business. The Times found that the awards go to companies big and small, those gushing in profits and those sinking in losses, American companies and foreign companies, and every industry imaginable.
Workers are a vital ingredient in any business, yet companies and government officials increasingly view the creation of jobs as an expense that should be subsidized by taxpayers, private consultants and local officials said.
The bottom lineLocal governments give up $9.1 million EVERY HOUR in business incentives, an average of more than $80 billion per year.  

For the rest of this comprehensive article, click here.  

Then ask yourself--and your supervisor--if it's fair for Tysons residents to pay added taxes so the corporations there can make even greater profits. 

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