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Veteran Advisor

Corporate give-aways article

  This is an article at the website that I posted and he writes about a book covering the topic of corporate cash gifts and tax incentives/breaks. I check that website often as they have numerous informative writers/articles to read. Anyway, enjoy(it made me mostly mad and somewhat sick to my stomach).



On the Dole, Corporate Style

David Cay Johnston | Jan. 4, 2011 02:04 PM EST


Imagine that Congress or your state legislature passed a law tomorrow saying everybody except you got a tax break because the politicians in both parties disliked your business.

Even if the loser were Julian Assange's WikiLeaks, that law would be struck down by the courts on any number of grounds, including violating the Constitution's equal protection clause and perhaps the third clause under Article I, section 9, which prohibits bills of attainder.

But what about the opposite case? What if the government passed a law requiring every business to pay a tax except your competitor's business?

That kind of government meddling in the market goes on every day in America. Now, thanks to a book being published by Palgrave Macmillan titled Investment Incentives and the Global Competition for Capital, we have some idea of how much these giveaways to businesses cost and the harm they are doing.


But what takes the breath away is the increasing size of the welfare given big businesses as governments compete to shower gifts on companies with capital to invest, even when it means hardly any new jobs.

Back in 1967 I got onto the front page of my local weekly with my first exposé, which dealt with tens of thousands of dollars going to a building contractor that had bid low and charged high for a new county courthouse. Thomas showed that today's state and local welfare for businesses requires mechanized shovels to scoop up the cash, compared with spoons for the giveaway I wrote about 44 years ago.

Many investment incentives cover 30 to 45 percent of a factory's cost, Thomas showed. He said that the biggest recent American incentive had a net present cost of $734.3 million. That paid a fifth of the cost of a ThyssenKrupp steel mill that opened this year near Mobile, Ala. It turns out stainless and high carbon steel.

"The site selection was a classic location tournament," Thomas wrote. Cushman & Wakefield Global Consulting visit 33 of 67 possible sites and then induced Alabama and Louisiana, two of the poorest states in America, into a bidding war to see which would give the most to the European company.

The winner, Alabama, will eventually get about 2,700 jobs at an average cost to taxpayers of $271,963. That's more than those workers will earn in five years, so the deal may never produce a payoff for Alabama taxpayers, and even if it does, the cost will be very high.