|
Harry, rather than try to elaborate again on the multiplier effect myself
or argue why the state of Arkansas has not profited like the Saudi Royal Family
from Wal Mart’s global corporate largesse, I refer you to several local
economic studies, a pending legal challenge to corporate welfare and some
topical readings: Money spent local,
stays local “Several studies have shown that money
spent at a locally owned business stays in the local economy and continues to
strengthen the economic base of the community. A 2002 case study in Austin, Texas showed that for every $100 in consumer
spending at a national bookstore in Austin, Texas the local economic impact was
only $13. The same amount spent at locally based bookstores yielded $45, or
more than three times the local economic impact. (Civic Economics, Austin
Unchained October 2003) A 2003 case study of Midcoast Maine covering several lines of goods and services validated
these findings. In Maine eight locally owned businesses were surveyed. The
survey found that the businesses spent 44.6 percent of their revenue within the
surrounding two counties. Another 8.7 percent was spent elsewhere in the state
of Maine. The four largest components of this local spending were: wages and
benefits paid to local employees; goods and services purchased from other local
businesses; profits that accrued to local owners and taxes paid to local and
state government. All eight businesses banked locally, used local accountants,
advertised in local businesses publications, purchased inventory from local
manufacturers, and used local Internet service providers and repair people. The
study estimated that a big box retailer returns just 14.1 percent of its
revenue to the local economy, mostly in the form of payroll. The rest leaves
the state, flowing to out-of-state suppliers and back to corporate headquarters.
(The Economic Impact of Locally Owned Business vs. Chains: A Case Study in
Midcoast Maine - New Rules Project, September 2003.) Tax Revenue Goes Further Local businesses in town centers also
require comparatively little infrastructure investment and make more efficient
use of public services. The taxes paid by large retailers often do not cover
the increase in public services that are required and the difference can be
dramatic, according to a recent study in Barnstable, Massachusetts, a city of 48,000 people. The study, conducted by Tischler
& Associates, compared public revenue and costs for various land uses. It
found that the city's small, downtown stores generate a net annual surplus (tax
revenue minus costs) of $326 per 1,000 square feet. Big-box stores, strip shopping centers, and
fast-food outlets, however, require more in services than they produce in
revenue. A big-box store creates an annual tax deficit of $468 per 1,000 square
feet. (Stacy
Mitchell, Main Street News, Feb 2004)
http://livingeconomies.org/localfirst/whylocalfirst/index_html#2 For recent comparisons of local/regional
employers contributing more than do national/multinational firms, please see
The Andersonville, Illinois Economic Impact Study, http://www.andersonvillestudy.com/. I also recommend
the Santa Fe Economic Impact Report,
especially pages 11-13, and the Austin Economic Impact Study, which
compared revenue flow from a chain vs a local bookstore. You
can review other economic impact reports here http://livingeconomies.org/localfirst/studies. I
would be happy to send PDF files of these three to anyone on the FW list who
contacts me. Here are a couple of miscellaneous items from my files on corporate
welfare and the (r)evolution of municipalities trying to restore balance. Please note the legal
question being tested in the court system that tax giveaways violate the
Commerce Clause: Towns
hand out tax breaks then cry foul when jobs leave - In Illinois, Iowa, and
Florida they’re looking at litigation but there is progress in policy making.
Other municipalities have written protective clauses that if the jobs don’t
materialize as promised w/in 3 years, for example, the tax breaks go away and
are to be paid back; also restricting tax incentives to poor neighborhoods
where consumers are underserved: “Smaller businesses say there is also a fundamental issue of
fairness.
Why not give a tax break to the reliable little company that holds a piece of
Main Street real estate and never threatens to leave town? "We let the other taxpayers down
if we don't go after Maytag," said Robin Davis, the county treasurer here
in Galesburg, who favors a lawsuit to recover taxes from Maytag. "My sense
is if people don't want to work here and pay taxes, we don't
want them." There
are six taxing entities that gave incentives to Maytag, and several have
decided not to pursue the company, arguing that it sends the wrong message at a
time the town is desperate to attract new jobs. "When I first heard Paul Mangieri talk about suing
Maytag, I cheered," Mr. Klinck, the car dealer, said. "But on further
reflection, I thought this would negate our message." Galesburg
never tied its tax breaks and cash grants to a long-term stability, but the State of Illinois has since written certain
requirements into its laws on enterprise zones.” Tax
Attacks III... If
Democrats are interested in playing a little offense, they could do worse than
champion the cause of eliminating the ability of footloose corporations to
extract tax concessions out of job-hungry state and local governments. These are some of the least-productive
of all corporate giveaways. They add virtually no jobs to the nation as a
whole, yet happen routinely because city A knows that if it doesn't offer up
the tax breaks, the corporation in question will send--or at least threaten to
send--its jobs to city B. Obviously, the extortion could end tomorrow if every state or local
government agreed not to play the game. Then they could compete solely on
criteria that really matter: availability of land, skilled employees, reliable
public services etc. The nation's governors
have on occasion talked about creating a pact to stop the bidding war, but it's
never quite happened. What's needed is federal action--a statute that would
block these unproductive giveaways. Such a statute ought, of course, to come
from Congress; Democrats and enlightened Republicans should offer up one. But
meanwhile, as I noted before, the Sixth Circuit Court of Appeals in Cincinnati has taken the initiative,
with a ruling last fall
that in essence defines the grossest of these giveaways as a violation of the Commerce Clause. A number of readers
posted quite impressive comments questioning both the legal and political
merits of this strategy. Since then, one of the attorneys who made the winning
argument to the court, Peter D. Enrich of Northeastern University School of
Law, sent me an email defending his views. I post that email here with his kind
permission. First, as for the
merits of the Commerce Clause claim: Of course, we'll have to see what
ultimately happens in the 6th Circuit and perhaps in the Supreme Court, but the
decision rests on a very strong and univocal base of case law and scholarship, all
of which points to the conclusion that a very wide array of the most common
state/local tax incentives for businesses are unconstitutional. If it would be
helpful, I'm happy to give you references to both case law and law review
articles. I anticipate that, in the next few months, there are likely to be
several other cases presenting the same arguments in a number of other states. Second,
for those who argue that these incentives are essential to provide jobs, it's
important to note the broad body of econometric research which debunks the
notion that state/local taxes or tax incentives are a significant factor in
business location decisions. The simple fact is that state/local taxes
represent, on average, only about 1 percent of a business's costs; they're far too small
a factor to play a real role in rational decisionmaking. Probably the best recent
survey of the economic literature is Robert
Lynch, Rethinking Growth Strategies (Economic Policy
Institute 2004), although similar results are reached by a broad array of
others (referenced in Lynch's book) with less "political"
connections. The only demonstrable effect of the incentive competition is the
dramatic reduction in the share of the costs of state and local government that
are borne by businesses, not any increase in -- or shift of -- levels of
investment or employment. The
political challenge is that it's very hard for any state or local official to urge
his jurisdiction to be the first one to "unilaterally disarm." That's
where the Commerce Clause argument becomes useful. However, the courts can't
solve this alone. In fact there's already
legislation pending before Congress that would undo the decision. So, what we need now is
political support for getting the states out of the "race to the
bottom" business, and for refocusing their energies on the positive
functions (schools, roads, amenities, etc.) that can truly improve business
climates... Prof.
Peter D. Enrich Lynch, Robert: Rethinking Growth
Strategies http://www.epinet.org/content.cfm/books_rethinking_growth Related Readings David Korten When
Corporations Ruled the World. Note the theme of
Adam Smith, Betrayed. http://www.developmentforum.net/corprule/corporat.htm Michael Shuman Going Local. Last I heard, Shuman was working
on a new book but it may be slowed by work in New Mexico launching The Gulliver
Fund dedicated to small business investments and a local stock exchange,
addressing the venture capital/wealth creation trap. Stacy Mitchell New Rules Project/The Hometown
Advantage http://www.newrules.org/journal/hta.htm You can also review some progressive Economic Principles here http://livingeconomies.org/aboutus/principles/ Mail scanned by NAV |
_______________________________________________ Futurework mailing list [email protected] http://fes.uwaterloo.ca/mailman/listinfo/futurework
