Politicians in the states of Missouri, South Carolina, Alabama and others have started their courtship of Boeing. The company recently threatened to move production of the 777X aircraft out of the state of Washington after deals with labor unions failed. This came after entreaties from Gov. Jay Inslee, a Democrat, and the promise of $8.7 billion in tax subsidies enacted by the state Legislature.
Gov. Jay Nixon, a Missouri Democrat, convened a special session of his state’s Legislature in November in order to construct a deal with tax subsidies to offer the company.
This is only a month or so after Nixon reached an accord with his Republican counterpart in Kansas, Gov. Sam Brownback. A ceasefire was declared in what can only be described as an economic border war between Kansas City, Kansas and Kansas City, Missouri. One city would offer tax subsidies to a company in the other city, then that company would move, and back and forth it went. This is what constituted as economic development in Kansas and Missouri.
I had assumed Missouri learned its lesson. I was mistaken.
Nixon has said he is prepared to offer the aerospace company $150 million in tax subsidies annually, as reported by The Associated Press. But that costly overture doesn’t even measure up to the company’s demands. Boeing wants whatever state it settles in to provide land and infrastructure at little to no cost. For Christmas, Boeing would also like for all “applicable tax structure including corporate income tax, franchise tax, property tax, sales/use tax, business license/gross receipts tax and excise taxes to be significantly reduced,” reported the St. Louis Post-
Dispatch, which uncovered the list.
To be clear, the tax subsidies offered by Washington represented the most substantial reduction in state business taxes in U.S. history – and the state had already provided Boeing with tax subsidies years prior.
With that in mind, what makes Nixon or the lawmakers of Missouri, particularly Missouri Republicans who assuredly claim to be of a laissez-faire mindset, think that Boeing won’t leave them like they left Washington?
Many people do not know that in these development deals that include tax subsidies those companies are not held responsible for job creation. There is no contractual duty. A company can take your community’s money, fail to invest in the area or hire more workers, and then leave to find other suckers in other states.
Suckers like State Sen. Andy Manar of Illinois, a Democrat. In Illinois, Archer Daniels Midland Co. (ADM), a commodities trader, has said it plans to move out of Decatur, Ill. In response, the state Senate passed a bill, which offered the company $20 million to $25 million in tax subsidies. The bill was sponsored by Manar.
What city was the frontrunner in ADM’s search for a new location for its headquarters? Chicago, Illinois. Ultimately, Manar and the state Legislature have offered to pay a company not to move from one city into another city in the same state. Try to make sense of that. Chances are you’ll have as much trouble as I did.
“Those are two areas of the state that typically get pitted against each other,” said Manar about the situation in an interview with Reuters. Apparently, his response to this problem is to facilitate the kind of battle companies’ force between states and localities.
This activity by companies is not actually a crime, but I so desire to call it what it feels like: extortion. A company which hires a sizable number of people in a community can threaten to leave that community unless they pony up. If the community pays the piper, they risk their own fiscal stability. If not, they risk an increase in unemployment.
Our states, towns and cities will forever be at the mercy of corporate interest unless a stopper is put to this mindless notion of job creation and economic development – which has come to mean the transfer of public dollars into private hands. And we cannot compete with China, India and Brazil if this is the way we compete with ourselves.
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