New Documentary Chronicles How Memphis’s Corporate Welfare Scheme with IKEA Backfired

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A new documentary profiles examples of corporate welfare that shortchanged taxpayers and business owners, including in Memphis, where city officials bestowed a generous tax break upon IKEA.

This documentary, Corporate Welfare: Where’s the Outrage?debuted on public television and YouTube late last month. Free To Choose Media Executive Editor and Cato Senior Fellow Johan Norberg hosted the documentary.

The documentary profiled how Memphis’ Economic Development Growth Engine (EDGE) gave IKEA a $9.5 million tax break over 11 years in exchange for IKEA agreeing to create 175 new jobs. Each new job was to offer an average salary of $41,000 per year. Memphis EDGE’s actions displeased the city’s other business owners, who were based locally, according to the documentary.

Mark Cunningham, with the Nashville-based Beacon Center of Tennessee, appeared on the program.

“You are really pitting these gigantic corporations who know the government and have tons of lobbyists against Mom and Pop shops in our community that we are trying to save,” Cunningham said.

“You are basically asking people to pay more tax dollars in order for their competitor to  succeed over them.”

Beacon is a right-of-center think tank.

IKEA officials defended their actions in an email to The Tennessee Star on Tuesday.

“States and municipalities across the U.S. work hard to attract new businesses and gainful employment opportunities for the benefit of residents and communities. In 2016, IKEA proudly opened our Memphis store. As part of the planning process, we partnered with local government on an economic development package that helped make this investment possible,” IKEA officials said.

“In 2019, we proactively asked the Economic Development Growth Engine Industrial Development Board of the City of Memphis and County of Shelby, Tennessee (EDGE) to adjust the terms of our initial incentive package, and they agreed to the proposal. We are proud of the 157 jobs we have in IKEA Memphis today allowing us to continue to bring home furnishing solutions to our many customers in the area.”

IKEA ended 2018 with 147 employees on site, 28 jobs short of its commitment to bring 175 new jobs to Memphis. Employees made a median average wage of $36,944 at the end of 2018, $4,067 short of the IKEA’s commitment to pay employees $41,011 without benefits.

Officials with the European-based company described just how selective they are in choosing store locations. IKEA’s application revealed the company picked communities based on where it can get the most generous tax incentives.

Those areas include St. Louis, Merriam, Kansas, and Centennial, Colorado, according to IKEA’s application with Memphis.

The documentary also chronicled instances of crony capitalism in Chicago and Baton Rouge, Louisiana.

“Many government programs begin with good intentions, but they result in unintended consequences,” Norberg said in a press release.

“From what I’ve observed…it’s better to let the economy evolve in its own natural way, rather than to rely on government intervention.”

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Chris Butler is an investigative journalist at The Tennessee Star. Follow Chris on Facebook. Email tips to [email protected]

 

 

 

 

 

 

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5 Thoughts to “New Documentary Chronicles How Memphis’s Corporate Welfare Scheme with IKEA Backfired”

  1. John

    No huge corp in their right mind is going to open a business in Memphis unless there’s a huge tax incentive for them. I wonder what FedEx’s deal was?

    When my former company opened a retail store in Memphis, they had considerable trouble filling the positions because most of the applicants had a record.

  2. Jay

    The payola to the politicians is just too good to pass up.

  3. PaulJ

    I think a few less jobs and a few dollars short in pay is a small price to pay for corporations commitment to BLM and LGBTQP Pride. Conservative, Inc. members like Sean Hannity would heartily agree.

  4. 83ragtop50

    Always the same old story regardless of the type of business. Big promises never achieved with no consequences. We Tennesseans are left to pay for their ill gotten gain. Will those flushing our tax dollars down the toilet ever be held accountable? Growth at any cost is detrimental to our communities. Don’t believe it? How much has your property taxes and cost of living gone up in the past 5 years. New arrivals cost an unbelievable amount to absorb into the community. Costs that include added demand on basic infrastructure, schools, higher rent, congested highways, etc. This is an absolute crisis in Tennessee right now.

  5. Kevin

    Why are “we” paying a retail outlet, who pedals things made in China and other foreign countries ANYTHING! 145 or 157 jobs is a drop in the bucket for a city like Memphis. This is NOT economic development, it’s National hari kari!

    The first businesses to start laying people off when there is an economic downturn are places like Ikea!

    When are we going to start incentivizing businesses to bring manufacturing jobs, particularly critical products like medicines, micro chips and electronics, back to the USA?

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