Amazon has pulled out of its plan to build a headquarters in New York City (or has it?) after negotiations with state and local governments failed to produce the deal it wanted.
That’s funny: in my various moves and investments around the state, I don’t recall any local government ever sitting down to “negotiate” with me about what laws I’d follow, what taxes I’d pay, and what laws and taxes I’d get to ignore. When I renovated the cabin and built a house at Lake Herman, our zoning director Deb didn’t dicker with me about the cost of the building permit. When I moved to Spearfish to teach, the city council didn’t offer to refund my sales taxes for the first year or two to induce me to stay. In four years in Aberdeen, my friend and city councilwoman Jennifer Slaight-Hansen has never indicated that I’d make any headway asking the city to split the cost of replacing my sidewalk. Everywhere I’ve lived, I’ve just assumed that I have to follow local zoning laws and pay local taxes just like everyone else, with no negotiation.
So if I’m people, and if corporations are people, can someone remind me why some people get to negotiate which laws and taxes will apply to them while people like me just take the laws and pay the taxes as written?
Some legislators (not South Dakota legislators, heavens forfend any such vision arise here, but folks around the country) are considering legislation that would stop all this corporate favoritism, an End Corporate Welfare Act that has sprung from Amazon’s effort to extort exceptions from New York:
…the End Corporate Welfare Act is circulating in several states, including New York. The bill would essentially call a cease-fire on awarding tax incentives to certain companies by creating an interstate compact of states that agree to end the practice.
…A similar version to New York’s bill is also making its way through the Arizona and Illinois legislatures, while lawmakers in other states, including Connecticut, Florida, Massachusetts and New Jersey, are considering introducing such legislation.
“For decades, corporations have pitted states against each other in a race to the bottom,” [New York Assemblyman Ron] Kim says. Watching mayors and governors fall over each other to throw money at Amazon, a multibillion-dollar company, he says, was the tipping point for a lot of people. “Many lawmakers saw this and thought, ‘This is enough. We can’t be pitted against each other like this’” [Liz Farmer, “With Amazon out of New York, Some Lawmakers Seek Multistate Ban on Corporate Tax Breaks,” Governing, 2019.02.14].
End corporate welfare? Make all persons under the law follow the law and pay their taxes? What could be fairer than that?
The likely justification is that each “person,” or group of persons, has different individual circumstances that merit different taxation treatment, based on the needs or objectives of the taxing community. For example, low income elderly homeowners pay a different level of property taxes than landlords on identical real estate, perhaps to satisfy a community goal of reducing homelessness of low income elderly individuals.
So perhaps a better question is whether any identifiable circumstantial differences between a non-corporate “person” and a corporate “person” merit different taxation treatment, based on the needs or objectives of the taxing community. And with Amazon and other businesses, a key difference with a normal “person” is the business’s liklihood of creating enough new jobs that will increase new tax revenue in an amount even greater than the tax break cost.
That justification has typically been undermined by study though, hasn’t it? I will look for the articles, but I recall economists arguing that such abatements are essentially creating a race to the bottom where the only true beneficiary is the corporate entity.
I remember the late Peter DeHueck speaking in the early 1990s about state economic development. Part of the Mickelson administration (Sec. of Labor? GOED?), he had previously worked in Tennessee and was involved in the state’s negotiations with GE to build and open a Saturn assembly plant in that state. His lesson was to hope that SD never was offered a similar “opportunity.”
Some incentives have a definite place, but they can indeed incite a race to the bottom, as Dicta says. One complicating factor is which incentives are offered and by whom. Forgiving property taxes may aid the state, but may hurt cities, counties, and school districts. Construction-based contractor’s excise tax can be a shot in the arm of the state budget that can justify years of tax abatement, but if the collected taxes are immediately spent, what happens in the later years when the tax abatement is still in place? Are we in a Ponzi-like scenario where later development taxes cover shortfalls in routine tax collections?
SD already competes favorably with other states with its business-friendly environment (relatively low taxes, low regulation, low crime, no compulsory union membership, etc.). We shouldn’t need to forego large amounts of what taxes we would otherwise collect in addition to the other incentives we offer, even if winter climate and lack of a hub airport are downsides in the overall equation.
What corporate welfare?
The tech giant reportedly used various tax breaks and credits to claim a $129 million rebate on $11 billion in profits last year. Amazon almost doubled its profits from $5.6 billion in 2017 to $11.2 billion in 2018, but the company isn’t expected to pay a cent in federal taxes this year, according to a new report.1 day ago
Did not pay a cent in taxes on 11.2 billion profit!
Just a reminder: the individual Trump/GOP tax cuts WERE NOT CUTS for the little guys:
https://www.huffpost.com/entry/tax-refunds-gop-law_n_5c671dcee4b033a799429900
I’m all for an end to corporate welfare. Welfare, by it’s nature, should go to those in need. When Amazon clears $11 billion and pays $0 taxes, they have no need, just greed.
The NFL is perhaps the very worst corporate shysters in the nation, but that’s another subject. I hope NY and other states are successful in making a deal to stop being suckers. Like Dicta, I’m pretty sure I’ve seen statistical evidence that corporate welfare does not pay off for the state that doles it out.
How much tax exemption does the state provide certain industry sales in South Dakota? Seems like it would be more than enough to fully fund Medicaid Expansion.
I’m amazed that our fearless “leaders” aren’t out there touting SD as the logical place. Central location, lots of space, employable people, no state income tax, affordable housing and so on as why Jeff shouldn’t choose us.
Bet Kristi and company would be willing to give away the farm (or ranch).
Bucko said, “Bet Kristi and company would be willing to give away the farm (or ranch).”
But not their own– yours, mine, the neighbors, etc.
It’s amazing how some states have a level of political sophistication, where political realities like this can come into play, huh? But then again, maybe that’s why Citibank moved from New York to South Dakota back in 1981.
Personally, I became alarmed to this corporate presumption even before Citibank came to South Dakota, when I read back in the 1970s about the special relationship that the Disney Corporation has with the state of Florida and local authorities near DisneyWorld…. Fore ( ;-) ), you would think that Florida would be more like New York then South Dakota, but I guess not:
https://www.orlandosentinel.com/business/tourism/os-bz-disney-nuclear-20190214-story.html
Socialism for the special people: the corporations, the real estate developers, etc. The more one has; the more they get.
Here’s another socialism that castrates South Dakota students, small businesses, and our people – the single-provider for the last mile of internet services. Wax your lime green 1972 Ford Pinto as you read this analogy and remedy: https://blog.usejournal.com/you-drive-a-1972-pinto-because-your-neighborhood-makes-you-2b1c8663cea3
Mr. Claussen thinks FL would be more like NY. “That’s what a Damn Yankee would think!” (just kidding. My FL family would be proud.) South Florida is absolutely like NY. It’s mostly populated by retired New Yorkers. Central Florida (home to the Lansing’s since the slaves were freed) is as red as a baboon butt. That’s what attracted Walt Disney to the region. Northern FL is mostly hicks, KKK and married cousins. CA is like two different states. FL is like three … not counting the Keys.
Dicta, just to clarify, I did not intend to argue or assert that any determination a government body makes about the benefits of granting of corporate subsidy, including the claimed or hoped for tax revenue advantages, is either factually accurate or a good public policy – such a proposition. pro or con, is well be beyond the intentions of my comment. I simply wanted to set out what looked to be the rationale for different treatment of corporations in response to Cory’s inquiry to readers.
John, wasn’t SD’s removing usurer laws one of the key elements that brought Citibank to SD? Am I remembering that history correctly? We only had to make our state an unregulated playground for predatory lending, and then the banks would come here so that they could profit from that environment — hopefully dropping a few crumbs from the table for us to take.
Instead of de-regulating for the “public good” and hoping for the largess of corporate good will, why not directly govern and regulate for the public good? Have strong worker, environment, tax regulation so no matter the corporation, no matter the location, corporations are doing right by their community. The creation and perpetuation of corporate entities that work against the best interest of communities is bad (yet repeated) public policy.
o,
You are exactly right. When Janklow first started his negotitations with Citibank about moving to South Dakota, Citibank was also looking at Missouri as a possible location; but my guess is that South Dakota looked like an easier manipulation than the “Show Me State.” In fact, South Dakota pretty much said, “Show Me,” and then Citibank did.
Porter,
The Keys are the best thing about Florida. Hemmingway knew what he was doing….cats and all. ;-)
#DamnYankee