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There is some encouraging news on the economic homefront, despite a
lack of policy leadership from the Bush administration, which, to paraphrase
Rich Lowry (young neoconservative pundit at The National Review), seems stuck
on championing big, unpopular things like Social Security reform and the Iraq
war. The IRS is tightening some rule changes that will penalize those firms
who keep profits offshore. “The Treasury Department issued regulations this week
limiting cost-sharing arrangements that allow businesses to undervalue patents,
licenses, trademarks and other intellectual property transferred to a
subsidiary from a parent company”. (beware Microsoft and Big Pharma) “The new rules would require companies
to value these assets at the same price they would charge a competitor to
acquire them. Existing rules have
helped companies to stockpile more than $650 billion in cash overseas. Many
U.S. companies are repatriating those funds under a one-year tax holiday passed
by Congress this year”.
This explains part of the extra tax receipts being reported adding to a better
balance sheet. Despite a drought of
positive input on small business development, other than lip service, the administration
continues to practice destructive practices that only will get worse in the
global marketplace. Surely, they have learned a lesson from the failure of ‘staying
the course’ in foreign policy and will revisit the unilateralism of their
corporate favoritism in domestic policy. - KwC End Wasteful Corporate Handouts Neal Peirce, Seattle Times, Monday, August 15, 2005 Call it, if you will, the
crack cocaine of state and local governments' economic-development practices —
their endless flow of tax breaks and outright gifts to private corporations
they want to land, or figure they have to pay off to stay put. Today, the practice runs so deep,
pervading such a huge number of corporate location moves, that officials — even
those who privately admit it's an insane, zero-sum system — keep on forking out
the cash, no matter how incredibly costly the addiction. For years, Greg LeRoy
has been America's chief whistle-blower on the subsidies, which he now
estimates add up nationally to an eye-popping $50 billion a year. LeRoy's just-published book, "The Great American Jobs Scam" (Berrett-Koehler) tells the story
in full and colorful detail. §
There's
the story of how Raytheon, threatening to move defense operations
out of Massachusetts in the '90s, got the Legislature to give it tax breaks of
some $21 million
annually
— and then proceeded to reduce its Bay State payrolls by 4,100 people, or 21
percent, anyway. §
In
New York a few years ago, Mayor Rudolph Giuliani offered $940 million to keep the New York Stock Exchange and its 1,500 jobs in town — even though
many of its member firms had already been subsidized to stay in
Manhattan. §
The
payoffs continue. North Carolina, for example, recently offered Dell, one of the nation's most successful technology
companies, $225 million in tax incentives over 15 years to bring 1,500 jobs
into the Piedmont Triad area. §
When
Los Angeles was hit by aerospace-defense cutbacks and civil disturbances in the
early '90s, economic development officials in a dozen Western states, like
sharks sensing blood in the water, mounted aggressive job-piracy efforts to
capture L.A. industries with public subsidies. §
As
for Wal-Mart, the world's biggest corporation, LeRoy
has totaled up more than $1
billion it has received from municipalities in brick-and-mortar subsidies for
its stores and warehouses
— which end up throwing Main Street merchants out of business and feeding the
sprawl machine that befouls our air and drives up government costs. A good chunk of the
payoffs to Wal-Mart, Home Depot, Target, et al., LeRoy reports, are based on
enterprise zone and "tax increment" district financing that were
originally designed for lagging older cities, but are now turned into subsidy
machines to eviscerate historic communities even further. So what's to be done? First, says LeRoy, 1. "disclosure-disclosure-disclosure";
when the public is informed, the jobs blackmail diminishes. 2.
Then set up "clawback" recapture provisions when a
subsidized firm doesn't fulfill its job-producing promises. 3.
Stop all subsidies for retail deals, except in truly
depressed inner-city neighborhoods. But the really fresh ground
LeRoy plows is a big reminder to us that the scramble for jobs that ignited the
subsidy wars will soon be pointless — and simply unaffordable. With baby boomers
headed toward retirement, we're likely to face an enormous shortage of skilled
workers. From 1980 to 2000, the pool of prime-age (25-to-54-year-old) workers
increased by 35 million; from 2000 to 2020, the expansion will be just 3
million. Teachers, nurses, expert workers of all sorts will be in desperately
short supply. Huge new efforts (and spending) for work-force development will
be critical to stop a slide in the United States' standard of living. At the same time, America's physical plant is suffering from serious
disinvestment and deterioration: §
Traffic congestion is costing our economy $67.5 billion a year §
thousands of bridges need replacement §
wastewater systems are in bad shape §
more than 3,500 dams are now deemed unsafe §
transit spending is far below what's needed to maintain even the
inadequate systems we now have. The American Society of Civil Engineers
totals the repair bill at $1.6 trillion. Discount that 50 percent and the pending
bills are still staggering. The bottom line, says
LeRoy: "We need reinvestment, not
disinvestment." It's time to take a "fine-tooth comb"
to the $50 billion states and cities are now spending for corporate promises of
jobs. Any subsidy that doesn't serve compelling public need by creating more
skilled labor, or doesn't provide a "carrot" for companies to invest
in new skills development, should go on a list for likely elimination. It's time, LeRoy
concludes, for sweeping reform of the subsidy policies and to recognize them
for what they are: "wasteful handouts we can no longer afford." He's right: When will we ever learn? http://seattletimes.nwsource.com/html/opinion/2002440633_peirce15.html See: US tightens
regulations on offshore patents: IRS rule changes http://seattletimes.nwsource.com/html/businesstechnology/2002451408_patentshelters25.html Also see David Korten, Stacy Mitchell, Judy Wicks http://www.livingeconomies.org/resources/writings Storm Cunningham The Restoration
Economy, www.revitalist.org,
www.restorationeconomy.com (book) Michael Shuman, Going Local:
Creating self-reliant communities in the global age http://www.powells.com/biblio/7-0415927684-1 And other related links http://www.livingeconomies.org/resources/links |
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