New at Reason

April 19, 2007

John Sugg travels below the Mason-Dixon line to a place where the weather's warm, the women are genteel, and the corporate subsidies flow like water from a busted levee.

Comments

|4.19.07 @ 8:19AM|#

If Ford and GM were to move their headquarters to Atlanta or Birmingham or Tupelo, would they be able to stave off Toyota?

It's just so stupid it might work.

|4.19.07 @ 9:28AM|#

Every Southern state looks at NC's Triangle Research Park as a justification for high-tech subsidies/tax breaks. Notably my hometown, Columbia, SC (practically run by USC anyways) thinks it's going to be the next Austin, TX with the "Innovista" building spree.

Little do they realize that the whole 'you must do research here only' stipulation applied to these technology parks is largely bunk. (originally applied to NC because they didn't want the land used to build manufacturing centers)

For a software company, like IBM, (the largest tenant of NCRTP), there is no real difference between software development and software "research". So IBM gets to use the Park to essentially "manufacture" it's most profitable products.

Good article though. I'd like to see the actual economic benefits of the 15-yr (?) old BMW plant built in Greer, SC.

|4.19.07 @ 9:49AM|#

Ironchef, I agree about the BMW plant, and remember the outrage that the state of South Carolina gave BMW tax breaks worth about $30k per job. That outrage lasted as long as it took Alabama to land a Mercedes-Benz plant a couple of years later by giving tax breaks worth $40k per job. Now Kia's getting $168k per job. Fucking Kia!

My wife was dumbstruck when I told her about the deals that BMW and Benz got in the 90s, and how they paled in comparison.

Russ 2000|4.19.07 @ 10:10AM|#

Good article.

But...

"Toyota North America President Jim Press shrugged off its importance. "It wasn't a competition for incentive packages and the size of the packages," he told the Associated Press. "That really wasn't a factor in our decision." Much more important, he said, were the work force, training, infrastructure, and transportation access. "

... is corporate BS of the same degree as political BS.

If Ford and GM were to move their headquarters to Atlanta or Birmingham or Tupelo, would they be able to stave off Toyota?

No, because headwuarters costs aren't what is killing them. It's obligations negotiated long ago with the unions. But they'll get their subsidies in the form of a pension-system bailout.

|4.19.07 @ 10:34AM|#

Great article.

|4.19.07 @ 10:56AM|#

Hey, anytime someone tells you its not the size of the package that matters . . .

|4.19.07 @ 11:10AM|#

"Business development officials in both cities claimed that the prestige of gaining the NASCAR museum, plus the promise of expanded tourism, were worth forcing taxpayers to foot the bill.

Any time you hear the "civic prestige" argument, it means the numbers don't add up.
Hold on to your wallet.

Another anecdotal illustration: Indianapolis lavished incentives on United Airlines to build a maintenance center. How did that turn out? (hint: There is currently no United Airlines maintenance facility in Indpls, and no, United did not refund the incentives.)

I wonder what might happen if these bozos decided to invest in school voucher plans instead of relocation bribes?

|4.19.07 @ 11:54AM|#

Not to mention that the City of Irving is going eat tens of millions of dollars when the Cowboys move out after this year.

I don't have much use for the Mayor of Dallas, but she did the right thing in telling the Cowboys that they were welcome to build their new stadium in Dallas, as long as they didn't expect the City to pay for it.

Coyote|4.19.07 @ 11:58AM|#

Corporate relocation subsidies are like a prisoners dilemma game.

In a libertarian world where politicians all just say no to subsidizing businesses, then businesses would end up reasonably evenly distributed across the country (due to labor markets, distribution requirements, etc.) and taxpayers would not be paying any subsidies. However, because politicians fear that their community will lose if they don't play the subsidy game like everyone else (the equivalent of staying silent while your partner is ratting you out in prison) what we end up with is still having businesses reasonably evenly distributed across the country, but with massive subsidies in place.

To see this clearer, lets take the example of Major League Baseball (MLB). We all know that cities and states have been massively subsidizing new baseball stadiums for billionaire team owners. Lets for a minute say this never happened - that somehow, the mayors of the 50 largest cities got together in 1960 and made a no-stadium-subsidy pledge. First, would MLB still exist? Sure! Teams like the Giants have proven that baseball can work financially in a private park, and baseball thrived for years with private parks. OK, would baseball be in the same cities? Well, without subsidies, baseball would be in the largest cities, like New York and LA and Chicago, which is exactly where they are now. The odd city here or there might be different, e.g. Tampa Bay might never have gotten a team, but that would in retrospect have been a good thing.

The net effect in baseball is the same as it is in every other industry: Relocation subsidies, when everyone is playing the game, do nothing to substantially affect the location of jobs and businesses, but rather just transfer taxpayer money to business owners and workers.

|4.19.07 @ 12:19PM|#

One thing I'd like to see is how much of the subsidy money is federal and how much of it is state money. Presumably (if most of the funds are state funds), if you're a state that doesn't want to give out all sorts of incentives for business to come, you can just cut your taxes across the board and sit and wait for the other states to tax and spend themselves into oblivion, meanwhile you're developing a lot of small to medium sized companies from within your state because they can afford to do business there. One day, as your domestic companies grow, so will your tax revenue, you can continue to cut taxes, and the cycle starts all over again.

Oh, but wait. If you ask some people, you HAVE to get in on the game in order to get any jobs/prosperity/wealth/whatever, because otherwise... wait.. didn't we already see that the subsidies outweigh the benefits? Why then do we HAVE to play the game? We don't.

|4.19.07 @ 1:17PM|#

Much better to offer tax reductions to all businesses, here already or potential. The way it works now is established businesses see their labor costs soar when a new business is lured in and ...steals many of their workers.
Seems like half the Chamber membership (business persons) are always mad at the other half (those who profit through new development).

|4.19.07 @ 4:40PM|#

Just an FYI about the "Southern Hospitality" lede on this article. The phrase "Southern Hospitality" is not the hearty, genteel welcome that most people assume. The phrase originated in the post-civil war American South -- during reconstruction. "Southern Hospitality" was the phrase ironically used by Northern newcomers to the South (aka "Carpet Baggers") to describe the cold shoulder they received from their recently-defeated hosts.

biologist|4.19.07 @ 11:09PM|#

good article. I've enjoyed John Sugg's writing since he was the senior editor of the Weekly Planet (formerly and currently known as Creative Loafing) in Tampa