By Russ Latino
November 26, 2018 at 5:00 am ET
Congratulations. You lost.
When Amazon picked Northern Virginia and Long Island City, New York, for its new split headquarters site, officials in more than a dozen other cities likely drooped with disappointment. They, along with their citizens, should have sighed with relief.
In what is destined to be one of the largest corporate welfare contests in U.S. history, the “winners” are expected to dole out up to $2.2 billion in incentives and grants for the honor of adding an HQ that politicians will proclaim as the ultimate in economic development.
And surely, some will benefit in the short term. That’s always the case when you move resources from one group of people to another. There are always losers, as well, including citizens who finance the largesse with their work, and the thousands upon thousands of businesses that did not receive special treatment, but must compete with subsidized companies for employees and customers. In the long run, even Amazon, and its customers will lose, as carve outs and subsidies allow it to be less efficient, less productive and less innovative while still competing.
It’s admittedly hard to stand up against a rigged system when the system appears rigged in your favor. Unfortunately, the allure of spending other people’s money to tout new jobs, while ignoring their immense costs to taxpayers and principled business, is strong for many elected officials.
America shouldn’t ignore the costs, though. The estimated $2.2 billion that will be handed out by the winning states has to come from somewhere. Either taxes get raised or other priorities get cut. Providing millions, or billions, in incentives and grants to one company is grossly unfair to the companies competing with the subsidized firm.
America also shouldn’t ignore the practical reality. All too often, crony projects do not yield the promised results. On project after project, promised jobs fail to materialize, and the per-job costs are often astronomical. For example, Wisconsinites will pay about $1,800 per person for the incentives used to lure a TV production facility to the state, at a minimum cost of $346,000 per job created.
So yes, Atlanta and Indianapolis and Raleigh “lost,” in one sense. In reality, they won. But hold off on the parade. This cycle of concentrated benefits, in which a few gain at the expense of the vast majority, is hardly limited to the latest billion-dollar scramble. Every year cities and states spend billions of dollars competing for businesses in a race to the bottom.
As for Virginia and New York, until last week residents there had no concrete idea how much they would be paying for their politicians’ largesse. Neither locality released details of their bids while the process was ongoing, denying the state’s citizens an opportunity to engage in an informed debate on the merits of the deal.
For corporate welfare as a whole, though, the numbers in those states are staggering.
In New York, corporate welfare incentives that are publicly known total $34 billion. Last year alone the state spent (or offered in tax breaks) about $5 billion. In Virginia, total known incentives come to more than $1.1 billion, with $147.7 million of that piling up in 2017.
If the people of New York and Virginia were allowed to keep what they earned, they would invest it in their families and across their communities, contributing to organic economic growth and creating jobs. If government focused on performing its core functions well and building a fairer tax and regulatory environment, it would build the kind of civic culture that is inviting for job creators.
If you build that, they’ll come – and businesses will succeed based on the value they provide to their customers, not the subsidies their customers provide to them.
Russ Latino is vice president of the economic freedom portfolio at Americans for Prosperity.
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