Workers and taxpayers often lose twice when states and cities give out huge corporate tax breaks in the name of “economic development.”
Consider Raytheon Corp. In a 1995 “job blackmail” episode, it threatened to move jobs from Massachusetts unless the state rewrote its corporate income tax code for defense contractors, to save the company an estimated three-fourths of its tax bill. Then the state’s manufacturers association demanded “me too” for all manufacturers. Then Fidelity Investments demanded the same giveaway for mutual fund companies. A decade later, the state was losing factory jobs faster than the national average, the state treasury had lost $1.5 billion in revenue, and Massachusetts was cutting aid to public schools faster than any other state.
Episodes like this are prompting activists and journalists to investigate subsidized companies. Nearly every big company gets them, since the average state now has more than 30 subsidies: property tax abatements, income tax credits, sales tax exemptions, tax increment financing, low-interest loans, free land, training grants, infrastructure aid—and just plain cash.
Over and over again, investigators find many companies falling short on job creation or retention pledges. Companies paying poverty wages or failing to provide health care. Companies abandoning our cities and sprawling onto farmland. Companies outsourcing jobs offshore. Companies not creating any new jobs, even some that are actually laying people off. Others that just move jobs from one place to another, where they are proclaimed to be “new.”
How can they get away with this? Because the system is rigged. Corporations have it down to a science. They have learned how to chant “jobs, jobs, jobs,” win huge corporate tax breaks—and still do what they wanted to do all along.
That’s the Great American Jobs Scam: enabling corporations to exact huge taxpayer subsidies by promising quality jobs—and then letting them fail to deliver. The other commonly promised benefit—higher tax revenues—often proves false or exaggerated as well.
The taxpayer tab? More than $50 billion a year—much of which would be better spent on America’s looming skills crisis (thanks to baby boomer retirements) and our massive infrastructure deficit.
Greg LeRoy, executive director of Good Jobs First, a resource center for grassroots groups and public officials, recently authored: The Great American Jobs Scam: Corporate Tax Dodging and the Myth of Job Creation.
