Government Spending

Surprise: "Tax Breaks for Jobs: Half Fall Short"

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From the Cincinnati Enquirer, which studied big tax breaks given to southern Ohio and northern Kentucky companies who got all sorts of special tax deals to "invest" in the area and create jobs:

An Enquirer analysis of the region's 40 largest tax-incentive deals over the past decade found that only half created the number of jobs they promised, yet the companies claimed tens of millions in tax breaks and grants.

In Southwest Ohio, 12 of the 20 largest projects failed to meet hiring commitments – four even closed down and moved out. Only 4,804 jobs were created out of 6,534 promised. In return, Ohio has awarded tax breaks worth at least $19 million to the 20.

In Northern Kentucky, eight of the 20 largest job-creation projects failed to meet hiring commitments. The state won't disclose the amount of tax dollars paid to companies that signed incentive deals before 2009, citing confidentiality of tax returns….

More here.

Meanwhile, pols in Ohio and Kentucky are swapping companies by offering them tax breaks to move across the Ohio River. The Enquirer finds that the two states have offered more than $61 million in incentives to change locations from one side to the other. Particularly startling is a company called Omnicare, which has moved its headquarters a mile back and forth a couple of times for these reasons. Says Ohio Gov. John Kasich, who says he believes in small government that gets out of the way of business and successfully lured Omnicare back to the Buckeye State:

When asked about that at the Omnicare announcement, Kasich replied: "I'm the governor of Ohio; I'm not the governor of the region. We're creating an environment here where things are happening. You get rewarded for doing good things."

Kasich has made it known that he's eyeing Kentucky as a recruiting ground for Ohio. Omnicare was the first company his administration began negotiating with after taking office in January 2011.

Kasich may be thinking it's payback time. "In the past, everybody was coming to take our jobs out of the state," he says.

More here.

Back in 2007, John Sugg explored "The Folly of Southern Hospitality" for Reason. The South has long led the country in public incentives dished out for corporate relocations. Yet far from increasing jobs and economic growth, such effects have the opposite outcome. They suck money out of the economy and screw over other businesses and taxpayers (who have to pick up the tab). Read the whole story for a detailed explanation of why such bids fail to ensure long-term growth, result in fewer jobs than promised, and create a culture of corruption to boot. Here's a snippet:

Imagine a local economy of $100 million in 2000. A new business relocates to the area that year and directly spends $10 million. Economic development boosters claim that for every dollar spent another three are generated indirectly, as the relocation draws more businesses. (Manufacturers of automotive parts, for example, will establish plants or distribution facilities near a new car assembly plant.) So in 2001, the economy should be pumping along at $140 million—the original $100 million plus $10 million in direct spending plus $30 million from the multiplier effect.

"It never happens," says Phil Porter, an economist at the University of South Florida. Porter has looked at several cities where the multiplier effect was promised and checked to see if it worked as predicted. His method is to take the current economy and work backward—in the case of our hypothetical city, subtracting both the $10 million spent by the enterprise and the $30 million allegedly generated by the multiplier effect. If the effect worked as promised, he'd arrive at $100 million. Instead, he invariably gets less.

For example, local boosters in Tampa, Florida, claimed the 2001 Super Bowl brought $300 million in economic impact to the area. But according to sales tax receipts, sales in Hillsborough County (where Tampa is located) for January 2001 were about $1.44 billion, compared to $1.4 billion for a year earlier. There was growth, sure, but no more than is seen in many year-to-year comparisons when the Super Bowl wasn't a factor; in fact, it was less than the average growth, and far less than what was predicted.

Whole story here.

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  1. I believe this was discussed in the last season of Boardwalk Empire.

    Why the fuck would anyone want to go to Cincinnati?

    1. Jungle Jims and the fact that it’s a large enough city to attract generally obscure European prog and metal bands, and I live in Central Kentucky which makes Cinci the only place even reasonably close to do so.

      1. I’ve spent a fair amount of time in Cinci, including its downtown… *yawn*

      2. I just can’t take any place seriously that attempts to call the cinnamon flavored laxative Skyline makes chili. It looks the same way going in as it does coming out.

        1. Is it cinnamon or the mole that’s in it?

      3. Jungle Jims sounds like one of those places with 40 flavors of Everclear slushees spinning around in big barrels in the wall. But I’m guessing it’s something better because your comments didn’t come across as sarcastic.

        1. It’s a massive grocery store that has fucking anything you could possibly want from virtually anywhere in the world.

          Shit is the real deal.

      4. Going to Jungle Jim’s is one of my fondest childhood memories. The animatronic Elvis bear was the best part.

        1. The animatronic Robin Hood is my kid’s favorite.

  2. Wow. Brittany was still pretty hot eleven years ago.

    Of course Sarah is prettier.

    1. I was wondering who the chick was. But when you recognize an ugly mofo like Steve Tyler and don’t know Brittany Spears it at least shows you have decent taste in music.

    2. she only appears that hot because Tyler is also in the shot.

      1. LEAVE BRITNEY ALONE! JUST LEAVE HER ALONE!

      2. Try looking at her tits and belly.

        1. Try not-looking.

    3. Sarah?

    4. When it’s done right, white-trash skank is a fucking awesome look.

  3. I’ll tell you . . .

    I love Kentucky. Here in central Kentucky, people mostly mind their own business (unless you live in Lexington which is filled with liberals who wish to act as if they are in Chicago or New York in their quest to have people “conform” to the greater good), like to have good, old fashioned fun, grow lots of weed, distill lots of shine, and love their guns.

    But I’ll be god damed if we don’t take all of the fucking federal pork we can.

    1. You can’t help it. Pork is big business in that part of the country.

      1. it’s big business in EVERY part of the country. Need proof? Try actually doing something about earmarks in DC.

        1. way to miss a pig joke.

          1. And you get one with a coney!
            http://www.themeparkreview.com…..and_60.jpg

  4. That Super Bowl bullshit gets thrown about in Tampa all of the time.

    1. Please let there never be a Superbowl in Seattle. Please.

      1. Why it’s anywhere other than somewhere warm is beyond me. Who wants to spend thousands to freeze their ass off?

        And indoors is right out.

        1. A Superbowl would bring Seattle to a grinding halt. Hempfest was bad enough; a Superbowl would be worse.

          1. That sounds like a reason for hosting it to me. It’ll bring like eleventy billion dollars to the area and, possibly, stave off the eruption of Mt. Rainier.

  5. Government funding is what turns a regular bowl into a superbowl.

  6. the malicious truth is the Ohio example could be used in virtually any state. Years ago, NC refused to pony up over a carmaker; as a result, SC got a BMW plant. And, AL then got a Mercedes plant, and later, a Hyundai plant. And, GA got a Kia plant. This has less to do with govt and more to do with companies who first look for reasons to rule out places, then consider what may rule those spots in.

  7. They suck money out of the economy and screw over other businesses and taxpayers (who have to pick up the tab).

    But that money finds its way into the right pockets. And the politicians get to be on the teevee in hard hats!

    1. Hard hats with really big pairs of scissors!

  8. “There was growth, sure, but no more than is seen in many year-to-year comparisons when the Super Bowl wasn’t a factor; in fact, it was less than the average growth, and far less than what was predicted.”

    They’re trying to peddle the same shit in Tampa again; this time with the RNC. I predict the same result: more traffic, longer waits to good restaurants, and absolutely no financial gain. When ever I hear about these big events coming to town, I tend to stay home during those periods because it just isn’t worth the trouble to visit the part of town that is most affected by them.

    1. Wait, if there are longer waits to good restaurants isn’t there at least some financial gain?

  9. Every wannabe “economic development agency” should be forced to study the tale of Indianapolis’ courtship of United Airlines.

    Total fiasco.

    1. “Ten years ago, no one questioned United Airlines,” says Melina Maniatis Kennedy, Indianapolis’ economic development director. “Any city would have vied for 7,500 jobs.”

      I don’t need to read any further, do I?

  10. They’re trying to peddle the same shit in Tampa again; this time with the RNC.

    Lap dances are cash-only, so the bulk of the economic activity generated by hosting a political convention in Tampa may not show up in the revenue statistics.

    1. That’s a fair point.

    2. But there should be an uptick in Sex Worker jobs saved or created.

      1. It’s upticks all the way down.

  11. Wondering whether wage subsidies might work better. With these, if the jobs don’t materialize then the state doesn’t pay out the subsidy. Apply them across the board and don’t target specific employers or industries. This would have the effect of making the state’s labor artificially cheap at the cost of making cost-of-living artificially high. The state would become extremely inhospitable to anyone without a job; such a person would suffer the effects of the higher cost-of-living without benefiting from the subsidy. The unemployed and retired would thus be motivated to emigrate from your state, reducing the burden they create. (And foisting it on some other state.) A race to the bottom, sure, but your state would be in the pole position.

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