Government officials are “whipsawed” into handing out corporate welfare and other tax incentives to companies like Amazon, as they did this month in Tennessee, among other places, according to the head of a Washington D.C.-based nonprofit.
This is especially true as government officials try to entice a company to come to their state when they know those company officials have other options.
Greg LeRoy, executive director of Good Jobs First (pictured, above), said as much in an op-ed this week in The New York Daily News.
According to its website, Good Jobs First is a policy resource center that promotes corporate and government accountability in economic development.
“In game theory, public officials are in the ‘prisoners’ dilemma.’ They aren’t told who they are competing against, and if they find out, they know they must not communicate with their peers. Their job is to supply data — and the biggest possible subsidy package — and hope for the best. They may intensely dislike this game’s rules, but know they must conform, lest they be blacklisted by site consultants shopping the next deal,” LeRoy wrote.
“When a press release is issued, giving a politician a powerful re-election gift, the spin emphasizes the incentives. No one points out that state and local taxes — and therefore incentives that reduce them — are microscopic cost factors that rarely determine where a company expands or relocates. The bipartisan dogma that tax breaks ‘work’ is cemented in the public narrative.”
As The Tennessee Star reported, Nashville will get Amazon’s new Operations Center of Excellence in exchange for $102 million in taxpayer-funded performance-based incentives.
The new operation is supposed to have 5,000 new jobs with average salaries of $150,000 per year, according to Tennessee Republican Gov. Bill Haslam.
While Amazon’s investment to establish the operation is sited as $230 million, the announcement didn’t address the $102 million in incentives as the trade-off. Incentives from the state include a $65 million grant for capital expenses and allows Amazon seven years to create the 5,000 jobs.
A tax credit from Tennessee worth $21.7 million is intended to offset franchise and excise taxes, reported Yahoo Finance. This is a particularly interesting incentive, in that Gov. Haslam’s IMPROVE (Improving Manufacturing Public Roads and Opportunities for a Vibrant Economy) Act passed in 2017 lowered the franchise and excise tax for certain businesses.
Additionally, Nashville will provide a cash grant up to $15 million. Meanwhile, Metro hasn’t been able to fully fund schools or provide promised pay raises to employees, as previously reported.
According to the State’s Open ECD webpage, Amazon has received about $15 million in FastTrack grants alone. There may have been other tax incentives provided Amazon, but not available on the Open ECD website due to statutory taxpayer confidentiality provisions.
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