Thursday, March 31, 2011

Tax Breaks and Economic Development: Where Are the Good Jobs?

I’m still puzzling over what I heard from Greg LeRoy, Executive Director of Good Jobs First.  The bottom line: all those tax breaks we’re giving to corporations aren’t really creating that many jobs, nor are they making a big difference in the success of American businesses.  As he points out, even though tax savings may sound big in dollars, taxes make up a very small share of a company’s finances.  Even worse, many of those tax deals, which significantly reduce state and local budgets, undermine the other elements that contribute to a good business environment.  Ohio has a revenue crisis these days, in part because we’ve cut taxes and deals to attract new businesses, but that in turn reduces funding for education.  And a well-educated workforce is one of the most important keys to attracting new business. 

So if it doesn’t really, work, why do states and localities keep doing it?  Two reasons, as far as I can figure out.  First, businesses have the leverage to cut these deals, because they can make large contributions to politicians and parties and because they control the most precious commodity in today’s economy: jobs. State and local governments are thus easily persuaded to do whatever it takes, including bankrupting themselves, in pursuit of that one-two punch – contributions and jobs. 

Second, making deals to attract new businesses sounds so good, and it’s a quick fix, or at least it’s a quick action that looks like a fix.  In order to be re-elected, politicians need to show that they are taking action.  Bringing a new company to town is a great-looking action – it creates nice photo ops and it sounds so promising.  And as LeRoy points out in our interview, the politicians may be long gone, often on to higher positions, by the time anyone can figure out whether the deal yielded solid results.  Investing in education and infrastructure just aren’t as sexy, and such moves take even longer to show results than tax abatements for new businesses do.   

So our leaders aren’t likely to fully embrace the more economically-just, progressive strategies LeRoy advocates (flip through the powerpoint on the Center for Working-Class Studies website for a list of these).  LeRoy offers two primary solutions to this problem.  One is education.  Good Jobs First provides information and tools to help you track  the results of subsidies to businesses across America.  If citizens demand accountability, we might be able to persuade our leaders to use public money to attract good jobs.  The other solution is organizing.  When citizens band together, we gain power.  One way to begin is to join the Mahoning Valley Organizing Collaborative and community groups from across the state next week in Columbus, for the April 5 Day of Action “to show they do not support balancing the budget through cuts, but instead through serious, long-term solutions including reforming Ohio's tax structure and generating revenue by balancing corporate and personal tax contributions.” 

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