Bob's Links and Rants

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Saturday, May 10, 2003

From Molly Ivins:
Where they've got this figured out (almost) is Arizona, with all those unpredictable libertarian Republicans in the Legislature. They're fixing to pass a bill over there that would stop the state or any of its political divisions from offering tax breaks, new roads, cheap electricity, free water or anything else to inveigle some out-of-state corporation to come and build there.

And before you dismiss that with "Arizona is always goofy," take a look at all the studies showing that the jobs attracted by giving these special tax breaks to corporations do not pay out, even in the long run. In Time magazine's classic Barlett-Steele report on corporate welfare, this particular form of welfare was thoroughly exposed as a financial disaster for the states and towns that participate in it.

There's so much screwy going on in this country it's impossible to get around to all of it. The nasty competition between cities and states for factories and other businesses, in which each competitor tries to outdo the others with tax breaks, cash incentives, waivers from certain laws, and so on, has been going on for decades. In the long run, it has benefitted only the executives and stockholders of the corporations, leaving the states or cities further in the hole. I ranted last year about how Montgomery, Alabama (where I lived for seven years) had put together a city-state incentive package worth $126 million to lure Hyundai to locate an auto plant there (Click on the "single file" link near the top of the left column and search for Montgomery to read those rants.). That worked out to something like $70,000 per job created.

I'm going to have to read the Barlett-Steele report that Ivins referred to and learn more about it, but here's my general impression. In the 1960's, American cars were built in Michigan, foreign cars in Germany and Japan. A lot of the money from making American cars went to stockholders and executives of GM, Ford and Chrysler, but a lot also went to well-paid workers who belonged to the UAW. The auto companies and the union members paid taxes to Michigan, Detroit, and the other cities where they worked and lived. Today, American cars are built in Missouri and Texas and Mexico and China (parts, anyway), foreign cars are built in Alabama, Tennessee, North Carolina and Ohio (neither list is complete--there are still some working auto plants in Michigan). Much of the work is being done by lower-paid non-union labor, leaving more money for the stockholders and executives. The workers, being lower paid, pay less taxes to the cities and states. The companies, in most cases, are not paying taxes to either city or state; in many cases they are being subsidized. As with so much that's going on now, the competition between states for factories (always knowing that Mexico, Indonesia, China and others are there with super-cheap labor) has simply resulted in more money going from people who don't have much to those who already have too much.