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Wonder Why States Are Broke? One Reason is Companies Play Them Off Against Each Other

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By David Segal, executive director of the online organizing group Demand Progress and former member of the Rhode Island House of Representatives

The New York Times published an expose this week on Texas’s regime of business incentives, but for anybody who pays passing attention to so-called municipal and state economic development schemes, there wasn’t much news: Our states and localities are cannibalizing one another as they concoct targeted tax breaks which they use to lure corporations from their neighbors. Meanwhile, a bevy of middlemen wet their beaks by helping corporations pit sucker states off of one another and brokering deals to sell the tax credits that comprise much of the ensuing largess. Here’s the rub:

Granting corporate incentives has become standard operating procedure for state and local governments across the country. The Times investigation found that the governments collectively give incentives worth at least $80 billion a year.

That’s an especially big deal for cash-strapped states, banned from deficit spending, no printing presses on hand. The $80 billion figure represents a full ten times the budget of my state of Rhode Island, and more than 15 times the amount spent from locally-generated funds.

It’s the most basic of game theory dilemmas, and in a less corrupt political dynamic, one that could be solved by the intervention of sensible federal government actors, or perhaps even through the initiation of an interstate compact that had states agree to stop poaching from one another. (It would still be open season on those states who failed to join said compact, incentivizing their joining the protected bloc.) Rhode Island is rare in that it, at least, has a provision in place that bans its cities from using subsidies to swipe existing businesses from one another — though it’s never enforced. I’d heard (and seem to remember having once found) that Puerto Rico has miraculous language on the books that requires its lawmakers ot consider the impacts of its subsidies on the jurisdictions from which they’re stealing businesses — but perhaps that’s apocryphal.

Good Jobs First has done yeoman’s work to expose the machinations of the “Site Location Consultancy” industry, spearheaded by the maniacal-sounding Fantus companies. (Fantus Factory Locating Service and Fantus Area Research.) Prior to seeing them on paper, I’d always envisioned the spelling as the more malevolent-looking “Phantus” which comports with the shadowy, yet profound, nature of their work.) Felix Fantus got to work in the 1950s, and as GJF describes it:

For the next four decades, Fantus dominated the site location consulting industry, playing a central role in the relocation of thousands of workplaces, most of them factories moving out of the Northeast and Midwest to the South. By its own count, it helped engineer more than 4,000 relocations by the time Yaseen retired in 1977, and 2,000 more in the next decade….

Fantus survives today as a Chicago-based consulting affiliate of the Big Four accounting firm Deloitte & Touche.

A couple of case studies:

Boeing is a master of this manipulative art, flipping the usual government-to-contractor relationship in 2003 as the company put out a 2003 RFP for states to respond to, to see who would offer up the most lucrative package of tax incentives for a manufacturing plant for the 787. Washington State residents bested a couple dozen other states, offering to pay the hometown company $3 billion not to forsake them. (Well, it’s not quite fair to say that they were still deserving of the ‘hometown’ moniker at that point — corporate HQ had moved to Chicago a few years earlier, drawn by a mere $50 million in public funds.) Tragedy became farce in 2009, when South Carolina offered Boeing around $1 billion to open a Dreamliner plant there. Evidence of just how sad is this state of affairs: The WTO is the only body that’s threatened to provide any sort of meaningful check on this sordid dynamic, ruling that several billions of such subsidies to Boeing were problematic — but that European subsidies to Airbus were even more severely infringing.

Perhaps the most transparently absurd manifestation of war-between-the-states phenomenon is the case of the film tax credit, driven by the movie industry’s exploitation of star-struck state legislators who seem to believe that the likes of Boise and Des Moines stand to become the next Hollywood. The film tax credits spurred the most precipitous race to the bottom I’ve witnessed in my time in politics. It came to a head in 2009, when Wisconsin had just spent $100,000 dollars to support Johnny Depp’s personal grooming expenses and Connecticut was fixing to subsidize episodes of Jerry Springer’s talk show — lots of broken chairs to pay for. The capstone of this farce was California’s institution of tax credits to entice productions back to Hollywood. As my friend and former Massachusetts state rep Steve Damico and I wrote at the time:

This sprint to the bottom has just reached its predictable, pathetic conclusion: Burned particularly by the loss of the television show Ugly Betty, California’s recent budget includes a half-billion in tax credits of its own, under the guise of “stimulus,” as a bribe to keep Hollywood from off-shoring to Manhattan, Indianapolis, and Santa Fe, which are offering bribes of their own. The floor has been lowered across the land, achieving a new equilibrium where public subsidies accrue to industry moguls to make movies that would be made anyway. At least 42 states now provide incentives, with some exceeding 40% of production costs.

Even in the seemingly impossible universe in which a particular state seems to benefit from instituting such credits, it’s easy to see that once one abstracts to the regional or national level, all that we’re doing is paying people to move jobs to-and-fro, creating no new social value, and reducing net public benefit.

It’s worth deconstructing the particular form these subsidies tend to take. The terminology “tax credit” is construed to obfuscate the particulars of the mechanism at hand: Most people think it means that there’s a reduction in taxation on expenditures in service of the given project. Far from it, and far worse, here’s how it works: A movie films in State X, and spends $20 million therein. If State X offers a 50% transferable tax credit for film expenditures within its borders, it forks over $10 million thereof. In the case of a state like Rhode Island — or any state that isn’t the production company’s home base — the production company will have a accrued negligible state tax liability, so it will sell these credits to an entity that has a more substantial tax burden — usually a sizable corporation — at a rate of, perhaps, 80 cents on the dollar. A broker will take a cut of perhaps a nickel on the dollar. So the entity that the state was striving to subsidize gets only 75% of the funds the state is expending.

In the case study above the intended recipient of the benefit is an entity that’s achieving little social good (not hard to argue that much Hollywood schlock is, in fact, a social detriment) but even if it’s a worthy project that’s meant to achieve the benefit — say, renewable energy installations — tax credits of this form are always a raw deal for the public, unless a substantial percentage of the credits go unclaimed: A full 25% or so of the subsidy is misfiring, going to middlemen and corporations with significant tax burdens. If you want to fund something efficiently, just fork over cash. (This, of course, could never be made to happen, since then the public would understand that all we’re really doing is forking over cash to millionaires.)

It’s no surprise that tax credit brokers often make for generous campaign contributors. Such a figure is at the center of a still-growing scandal in Rhode Island which has been the subject of a fair amount of national reporting: Curt Schilling’s failed video game company 38 Studios, which received a $75 million loan guarantee and various tax credits in exchange for its locating in Rhode Island. The loan guarantee program was sold to us as that rare economic development proposal that seemed mostly sensible: A way to incubate and grow businesses indigenous to Rhode Island in the midst of the downturn, with credit very tight. Yet within a few months, state leaders had designated 60% of the fund for use by the (Republican, anti-tax, anti-welfare) former Red Sox pitcher. The company’s since gone bust, leaving the public on the hook for on the order of $115 million at last check.

It’s a mess, wrought by the usual mix of corrupt cash, a rotten philosophical paradigm, insane, inverted conceptions of capitalism (“States competing against one another is just the free market at work!”) and, especially in the case of the film credits, narcissism. In Rhode Island, all of the female reps of a certain age were giddy to get to do a photo op with Richard Gere in 2009, when he came to Woonsocket to film a movie called Hachi, which never saw substantial domestic release. (Nothing gendered here — no doubt most of my male colleagues would have been just as delighted to schmooze with a female lead, had one of equivalent standing every made her way to the state.)

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53 comments

  1. hunkerdown

    And how about Patrick Leahy’s (D-VT) cameo appearance in The Dark Knight Rises? Wonder what the quid pro quo was… tougher, nastier copyright laws? The Megaupload entrapment and shutdown?

    Transferrable tax credits for films… doesn’t that sort of make the states silent partners in the productions? Shouldn’t the states demand a share in the success, like they do with any other resource extraction?

    Hollywood’s supposed escapist content is getting a bit too deep into political stenography lately. There are more life-affirming ways to spend one’s time and money.

  2. Benoit Essiambre

    I’ve always wondered, why not lower corporate taxes across the board and increase dividend and capital gains tax to compensate? It seems a fairer tax anyways and it looks like it would be more difficult to dodge.

    1. bluntobj

      Because the plutocrats who have structured the tax code have nearly all of their income structured as capital gains, dividends, and exempt income.

      Besides, megacorporations can minimize their tax bill in the US to an unbelievable degree.

      Which is why capital gains and dividends need to be taxed heavily, and muni bond income needs to become taxable.

  3. digi_owl

    Seems like a continuation of the race to the bottom that started between New Jersey and Delaware regarding incorporation requirements.

  4. Aaron

    The Times article brought some much-needed attention to the hidden cost of the Texas boom. We recently cut $5.4 billion in funding for public schools, while enrollment was soaring! The conflicts of interest with the “Select” committee in charge of economic development are appalling. We now have a former railroad commissioner running the TEA.

    There’s a reason 600 Texas school districts are currently suing the state over school finance. The tax base that funds public schools is being drained of precious resources by crony capitalists. As a former school teacher it makes my stomach turn. But then again, I’m not entirely surprised considering the GOP state platform actually voiced their opposition to higher order thinking skills.

    http://aaronlayman.com/2012/12/texas-select-committe-to-siphon-money-out-of-public-schools/

    1. Miss Speech

      Aaron, thank you for pointing this out. (I am a current TX public school employee.) How far Republicans have fallen here. When Bill Clements was governor, even while TX was in a bit of an economic bust, he insisted on increasing education funding. Public schools improved, and higher ed was a real bargain. But Perry’s putting the car in reverse, and the effects will be devastating. It’s really not that complicated: tax money that should be going to schools is instead placed in a slush fund for favored businesses. Their taxes are slashed, while regular homeowners’ property taxes soar. Yet we still lost thousands of teaching positions last year.

  5. Jim Haygood

    ‘It’s the most basic of game theory dilemmas, and in a less corrupt political dynamic, one that could be solved by the intervention of sensible federal government actors.’

    You mean the federal government that runs a deficit of $1 trillion a year? The federal government whose Obamacare plan is driving up health insurance premiums at double-digit rates? The federal government whose auto design mandates add hundreds of pounds and thousands of dollars to the price of a car? That federal government?

    If more and bigger government could solve problems instead of creating them, we’d be debt-free and getting royalty checks from D.C.

    1. Beppo

      The federal deficit is a philosophically different item than a state deficit. Wether it’s 1 trillion or infinity billion.

    2. LucyLulu

      Jim,
      What kind of double digits are you talking about? Average employer sponsored plans increased 12%/yr in the 10 yrs from 1999 to 2008, prior to passing Obamacare. And how about the rebates for overcharges? Obamacare passes, suddenly folks notice their premiums are rising. Wake up, where ya been the last couple decade or two? It may be due in part to employers choosing to shed more costs to employees in more recent years. Small business premiums are more volatile. Claims from one employee one year can have a big influence on prices for everybody the next.

      http://www.kff.org/insurance/snapshot/chcm0111898oth.cfm

      Have you allowed for the cost of disaster relief efforts related to carbon-emission influenced climate change when you calculated the increased cost of cars? Or more simply, the drop in gasoline expenses that come with increased fuel efficiency? An additional 10 mpg can easily translate to $600/yr in gasoline savings ($4/gal. assumed, 50 gal/mo (3-4 tankfuls/mo)…. I like simple numbers).

    3. Systemic Disorder

      The point of the federal government stepping in would be to stop these sorts of giveaways through some form of national standards. Or, better, a more nationally uniform system of taxation.

      In New York City, the absurdity of corporate subsidies has reached the point where millions of dollars are handed out for companies to move from one Manhattan neighborhood to another Manhattan neighborhood. (I work for one that took the money to move to the Financial District a few years ago.) Subsidy wars between New York state and New Jersey have gone on for decades; often these involve tens of millions of dollars for a move that can be less than ten miles.

      And by the way, Jim, the federal government runs big deficits because it asks corporations (recipients of government subsidies) and the very wealthy (recipients of the profits generated by said corporations) to, pretty please, loan us some money instead of taxing them. All of this is capitalist business as usual.

  6. jake chase

    Great post. Just when I thought I had seen everything, something new that makes the situation even worse.

    It is too bad they cannot figure out how to include graft and corruption in GDP. Imagine the impact on economic growth that would produce!

  7. El Snarko

    At a local level this is a huge issue, because with falling employment and wages locally generated tax revenues are essentially falling and beyond state or local enhancements. I have heard it said (and seen it written) that Canada has a handle on this. Individual provences are not allowed to compete against each other. If this is true, that would be a start at providing a legislative model. Anyone know the truth of this?

  8. MontanaMaven

    Good book on this was written in 2005 by Greg LeRoy called “The Great American Jobs Scam: Corporate Tax Dodging and the Myth of Job Creation.” LeRoy talks about Fantus. All this giveaway also contributes to suburban sprawl with some factory plunked in the middle of a productive wheat field. And, of course, David Cay Johnston’s books “Perfectly Legal” and ” Free Lunch” are must reads for more scams.

      1. Aquifer

        And then there’s Robert Goodmans “The Last Entrepreneurs” 1982. First read this 20+ years ago – the title is descriptive of his dead-on thesis; our public institutions – states and municipalities – have taken over the functions of entrepreneurs – investing the capital, building the infrastructure and assuming the risk that is supposed to be the hall mark of “private enterprise” – great book, “dated” only in the examples used, but quite contemporary in the mechanisms employed – and this was written 30 years ago …

        Another way where business socializes the risk and privatizes the gains …

  9. Lyle

    Getting the states and local governments to pay is as American as apple pie. It started with the railroads, where for smaller towns it was pay us or we will not go thru your town. So counties issued bonds for the railroad examples include the Central Pacific RR in Ca. Today all business has learned the lesson of the railroads in earlier days, and so it happens. Nothing new here.

  10. Ralph Crown

    Laissez-faire capitalism used to mean the government didn’t meddle too much in business affairs. Now it means the government has both legs, one arm, and four fingers tied behind its back.

    This wholesale extortion goes on because nobody involved has the sense or the courage to put their foot down. Regulations don’t get passed, or they have no bite, or the responsible parties don’t enforce them. It’s Anything for a Buck, all the time. It’s why we have a Great Recession that’s teetering on the edge of Depression 2.0.

  11. Terry

    Unfortunately, this article focuses too much on the film industry and too little on tax incentives for moves of corporate headquarters, manufacturing facilities, and the like.

    Living in Virginia–which gets high marks from businesses for being “business friently”, meaning it provides much more in tax incentives than is the norm–the result has been that either the public picks up the tab for necessary public services and facilities or they simply aren’t addressed at all.

    In the case of Virginia where I live, the roads–interstates and local streets–are quickly approaching third-world condition and are congested to the point of gridlock because the governor (a Republican) and the General Assembly (Republican dominated)keep giving breaks to corporations and ALSO refuse to raise gas or other taxes to pay for roads.

    1. Klassy!

      Montana Maven has suggested some titles if you would like to read further. The film industry incentives truly are some of the most ridiculous.

  12. Heretic

    Another display of the power of supply and demand. In this case, many states still have high A-6 unemployment, so they are despatatelt looking for jobs; industry is highly profitable and has minimal costs to move from state to state, hence the negotiating position of industry is strong, while the states are weak, so industry is In a position to extract concessions from the states.

    It is sad to see the states, the representative of their citizens, bow before private interests.

  13. McWatt

    It’s not just states. Municipalities have jumped on this bandwagon since the mid 1990′s. Village boards all across the nation have been using Eminent Domain and TIF districts in a fiscally lethal combination to give massive land and cash grants to wealthy developers. I have fought this on a local level yearly since 1996 and was only able to stop the worst proposal of the lot.

    But really, you can’t blame them, it’s fun to play Developer with other people’s money and give it to your friends.

    Can’t wait to see this same scenario blow up good in China.

    “Catch-22 says they can do anything we can’t stop them from doing.”

  14. Peter

    Great topic. I would like to see more about this topic. It seems to be a problem that expands beyond tax credits. CEO’s use the same arbitrage logic to justify their rising salaries. Sports leagues play one city off of another to get them to pay for their facilities. Casinos claim they “bring jobs” even though they really just drain money from other entertainment venues and so on. And let us not forget how this arbitrage happens on an international basis.

    But how do we solve this conundrum without going too far towards centralized, top-down political systems? And how do we get conservatives to even discuss this in an intelligent manner? They see the world through individualistic glasses and this is clearly a systemic issue on many scales.

  15. jsmith

    Gee, am I sensing a plan?

    Let’s see, states bankrupt themselves enticing corporations but then since each one has – except VT – a balanced budget amendment on the books, they then have to turn around and – take it away, Rahm et al! – privatize all of the former state-run services and sell-off all the state-held assets to corporations to avoid their own – wait for it – “fiscal cliffs”!!

    Win, win.

    Nyuk, nyuk.

    Wait, jsmith, are you saying that the state “fiscal cliffs” – like the federal government’s “fiscal cliff” – are situations created through statute by bought-off politicians to ultimately further enrich fascist bootlickers?

    No, the fascist elite never, just never, roll out their criminal schemes on the state-levels first before they market them nationally, do they?

  16. Stratos

    Over five years before the Times “expose”, Pulitzer Prize winning reporter, David Cay Johnston wrote a hefty book about state and local corporate welfare. Free Lunch: How The Wealthiest Americans Enrich Themselves At Government Expense (And Stick You With The Bill) goes into great detail about the myriad tactics that corporate scam artists use to fleece gullible (or corrupt) state and local officials of taxpayer money. Some of the US’ biggest corporations were named: Walmart, Cabela’s, Enron, CSX, Hilton and Abbott Laboratories.

    These same corporations are behind relentless propaganda denouncing the poor for using any portion of our flimsy safety net. The corporate motto: “We want it all!”

    1. Heretic

      Abbott Laboratories… I am disappointed. I always liked Abbott; I have not read of any product controversies (I.e. lawsuits) or bad management, and their dividend is not excessive relative to their after tax profits, and they operate with minimal debt, (unlike Glaxo and some others)… I thought they were very ethical in conduct.

      What sort of ‘extractive behavior ‘ does Abbott engage in?

      1. Stratos

        Abbott Laboratories employs the trade association strategy of government subsidies favored by the majority of US businesses. According to David Cay Johnston, in 2003 Abbott belonged to a trade association called Pharmaceutical Research and Manufacturers of America (PhRMA). This trade association pushed through the Medicare Prescription Bill.

        The backstory on this bill is a putrid stew thick with corruption. Johnston writes, “the bill was written in a way that looked out first for the interests of drug makers and health insurance companies that sell prescription drug plans. The elderly were simply a tool to that end. The effort to conceal what was really going on was multipronged.” (p.238).

        This bill prohibited the government from negotiating for the lowest possible price. A true cost estimate of the drug benefit was hidden from the public and even politicians on both sides of the aisle to ease passage. The publicly stated cost was pegged at $400 billion over ten years. Medicare’s chief actuary at the time was threatened by his boss with “…dismissal for insubordination if any numbers got to Congress…”(p. 240). The real costs of the bill were $720 billion over ten years. This number was publicly revealed only after Bush’s reelection in 2005.

        The bill came up for a House vote on November 22, 2003 at three o’clock in the morning. Instead of the customary fifteen minute House vote, this vote lasted three hours in an atmosphere of bribes, threats and special deals. Johnston described the bill as “legislation by deceit”(p.241).

        PhRMA was in the thick of the wheeling and dealing. In fact, the head of PhRMA was also the chairman of Abbott during that period. Abbott was able to keep its hands clean by using PhRMA as a cat’s paw to claw in obscene taxpayer subsidies.

  17. Lambert Strether

    On the Massochio post on Rolling Jubilee, if the FAQ is inadequate, as the poster says, then that is a problem.

    Anybody who’s soliciting money for a project while not fully disclosing the risks of the project for its putative beneficiaries may have a self-image of being well meaning, but they’re not. Picture this scenario:

    Say I’m Joe Six Pack and my life collapsed in the crash but not enough for me to actually lose everything and sleep in the weeds.

    So the first thing I hear about the fact that RJ bought up my debt is a letter from the IRS on April 1 saying what I owe them, because they’ve decided that the forgiven debt is income. After all, I paid taxes last year so I’m not really destitute, or whatever their term is for people who aren’t total charity cases and get to accept gifts without tax.

    And I can’t pay what I owe on April 15, so now I am in trouble with the IRS, something nobody ever wants.

    It’s wrong to drop a bomb like that on Joe Six Pack, and it’s also wrong not to disclose to funders that the risk of that wrong is possible.

    And when we raise this issue, in whatever guise we raise it, the answer we get is always along the lines of the politics of it, the greater good, or the cleverness of the strategery.

    But such advocates are using Joe Six Pack as a means, and not an end (Kant) — treating him like a thing or an animal, there to be used — and if I want to play that kind of politics, then I can join one of the major parties.

    This sort of thing is exactly what Occupy used to be against. So WTF?

  18. Yancey Ward

    All the more reason to just tax at the individual level instead of at the business level. Of course, then you would be complaining about how Texas doesn’t tax income, so there is no end point to this discussion unless we just get rid of the states themselves.

    1. Lurker

      Since what this is really about is preventing states like California and cities like Detroit from experiencing the consequences of their policies, my guess is that abolishing the states altogether would be just dandy.

  19. Art Eclectic

    This same thing happens with large sports events as well. When I worked on ________ we always had cities “bid” to host the event, the bids would always include a certain amount of economic incentives such as police, fire, traffic, hotel, etc… The city with most generous incentives usually won the bid.

    1. Klassy!

      What a joke. Cities seem to be especially gaga over any sort of tech (and more specifically) social media companies.

  20. mikec

    The same idiocy is carried on internationally and often most agressively by those who who are avowed fans of the free market.

    Here in our banana republic (New Zealand) we are prepared not only to spend the money but to change the laws to support foriegn corporations. I bet this happens all the time as collectives of rich people clearly need protection from collectives of poor people.

    http://www.nbr.co.nz/article/hobbit-employment-law-changes-now-law-132362

    http://fmacskasy.wordpress.com/2012/11/11/john-keys-track-record-on-raising-wages-1-the-hobbit-law/

    1. Aquifer

      I heard there was a big deal about what’s his name director screwing union wages or some such when he made “The Hobbit” there?

  21. Klassy!

    The fact that there is a class of well connected and firmly entrenched consultants whose raison d’etre is securing these deals does not bode well for these sort of parasitic practices ending any time soon.
    Also, the fact that local press pays such short shrift to what these incentives entail makes it unlikely they will end. In my experiences relocations are just reported as “more jobs!” with lots of nonsense on how our community had all the ultra special features and workforce to lure them here. Ah, the power of flattery. Incentives are mentioned in passing.
    There seems to be absolutely no follow up of whether the relocating business lived up to their end of the bargain. GJF has done an excellent job explaining the different types of subsidies and providing a database of subsidies. I remember reading about some pyramid scheme company laying off workers and checked the database, and lo and behold they had received subsidies. This is what it has come down to? We’re luring Mary-Kay type companies?
    Particularly galling are the tax credits that essentially allow a company to withhold workers’ state inome taxes, and then pocket the money for themselves. Used to be subsidies such as property tax abatements were touted because of all the income tax that would be coming in.
    Luring the film industry really seems to be the worst of the race to the bottom. They don’t have permanent infrastructure, nor do they have a pool of employees with ties to the community that are probably not amenable to moving en masse.
    My question for others, is how is this sort of thing covered by your local press?

    1. Aquifer

      Covered by local press – ha, ha, ha -

      Here in good old CNY we have a decades long, literally, deal with, get this – the Pyramid Companies, over a mega mall with umpteen deals (it’s right up there in the GJF data base – Carousel Mall aka “Destiny USA”- Syracuse)

      The local newspaper was on board as the biggest cheerleader from the beginning – hey, all those new advertising bucks, what’s not to like? – after the deal was in the bag the paper did run a few stories on some eyebrow raising aspects …

      Oh yeah, BTW the paper had a tax forgiveness deal of its own –

      Actually what would make a good deal is to give a film company a deal to come and make a film about how Pyramid scammed for its deal = all the elements are there – colorful characters, whacko promises, oil tanks, eminent domain, suits with big banks over funding, – the works – Cannes here we come …

  22. Max424

    I once tended bar in a roadhouse honky-tonk that had two separate halves, with two distinct bars, and one day the owner conjured up a new master plan to have one half run a special, while the other did not.

    His bedazzling rational, which he relayed to me on the down low:

    “Competition is always a good thing, right?”

    I replied, “Absolutely boss. Like when you’ve gone fully catatonic, and the bad heart and the weak lungs are competing to see which one’s gonna kill ya first.”

    He looked me over like I was a recently discovered strain of queer duck, “So … are we in agreement?”

    “Absolutely boss. Say it all the time, old Abe got it wrong. A house divided against itself can stand all damn day.”

    “And if the initial foundations are good, even into the next.”

  23. kevinearick

    all the participants know exactly what they are doing, lining their pockets at a temporarily hidden exponential cost to the middle class…

  24. Aquifer

    I wish i could come up with a citation, but i do remember reading something about a suit which was instituted against one of the states ?Ohio, a number of years ago in Fed’l Ct based on a claim that a proposed deal along these lines was in violation if the Commerce clause, i do believe …

    Rats, i wish i could remember the details – never heard how that came out – does anybody out there know what i mean, or have i been puffin’ too long on my e-cig ….

  25. Aquifer

    NYS is a poster child for this stuff – they have had so many programs providing tax deals for “economic development” over the decades, they’d plug the toilet. Each time they come up with a new one they give it a different name with a different set of loopholes big enough to drive a mall through – administered by quasi governmental agencies with tax exempt status at the local level, your friendly neighborhood “IDA”, peopled by “good friends” of business. When somebody finally decides to out all the ripoffs, the legislature goes back, comes up with a new version with a new name and new loopholes and we’re off to the races again …

  26. Nalu Girl

    Someone earlier mentioned the “sports industry”. Here in the Phoenix area we have four, that’s right, four sports teams and each and every one of them demanded it’s own venue, financed by the city of county in which it is located. That really didn’t work out well for Glendale, which is going into the hole trying to keep the Coyotes hockey team there. The mantra is that these teams are generating revenue for the cities, but basically, all they are doing is taking money from one type of thing, like movie theaters and moving it to another. The only time it really worke out was when the world series and the super bowl were played here, and even then, the costs to the cities in extra police, traffic, etc kind do negated that.

  27. Ep3

    Couple things yves. First, I have noticed lately how celebrities are very careful about interacting with us little ppl. When a musical act comes to town, the musicians hide in their tour bus until show time, are escorted by bodyguards to the stage, play their show (same show the same way they played it last nite), then are escorted right back to their bus to drive to the next gig.
    Second, in regards to the tax breaks for movies (in some respects I think it happens with the factories too). The states are fighting for tourism dollars in these situations. Wait, let me say, it’s about votes. I live in the city that the Hugh Hackman movie Reel Steal was made. What that did was bring several groups of out of towners (outside money) to our community of 8k ppl. It was a way to pump prime the retail economy (food, hotels, etc.) by having consumers consume in these other communities. Yves, I am having trouble making my point. So these local small business owners get a little boost in business and continue to vote conservative. But since our economy doesn’t produce anything (we are a consumption economy), a community has to do something to generate growth in income. With a strictly consumer economy, nothing of value is created. It’s just I cut your hair while you flip me a burger. One may cost more than the other. But no value is created. A hamburger is disposable. Unlike a car or computer. That brings in wealth to a community (real product production). But that is all gone. So we have societies that have zero sum wealth. Wealth isnt created; it just changes hands. And with the film credit, cities like Detroit (where 3 movies called robocop were made about the city of Detroit yet was filmed in texas), need out of town money to come to their city and spend so that the wealth of the community can grow.
    Finally, regarding the factories, here in Michigan we have gotten our fair share of being screwed. Tho most plants that leave, go to Mexico. But specifically, the city of ypsilanti gave GM hundreds of millions in tax breaks to stay open for so long (build a new motor which meant all cars would have ypsilanti motors for roughly a decade). As soon as the ink was dry on the deal, GM took their hundreds of millions and left town.

    1. hunkerdown

      Well, that explains a bit about Ypsi then.

      Wouldn’t it be cheaper to the citizens and government to just cut checks to people in exchange for staying out of the labor market?

  28. Steve

    Its laughable that anyone would believe for a moment the Feds are some how going to “fix” this type of corruption at the state level.

    The entire Federal government is there to serve its corporate masters whether its the military industrial complex, the security/surveillance industry, the FIRE companies or the seemingly infinite schemes benefiting the connected that are hatched everyday on the banks of the Potomac.

    Government policy does a wonderful job of enriching the right patrons either by purchasing directly from corporations military arms and supplies (GE Boeing etc), surveillance equipment (software industry) or through bank bailouts and 0% interest loans via the Federal Reserve (Wall Street banks). These companies in turn funnel some of their gains back to government officials and politicians to keep the gravy train going.

    Another way to benefit the corporations indirectly is through tax code engineering, intellectual property laws and or various regulatory regimes designed to prevent competition and increase the profit margins for these favored companies.

    How are these people going to end it on the state level if it flourishes at the federal level?

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