Remember the Alamo! Chargers fans will shout those words if Texas governor Rick Perry succeeds in wooing the local team to San Antonio, where it would presumably play in the Alamodome. Perry — who flamed out so embarrassingly in the 2012 Republican presidential race, despite fundraising help from Chargers president Dean Spanos — has come to San Diego several times to filch jobs for his state.
Boasting of Texas’s lack of corporate income taxes, minimal regulation, and fat relocation subsidies, Perry wants San Diego biotech companies to relocate to Texas. He has been featured in job-pitch radio ads that run in San Diego. He bragged during one San Diego trip that one third of the companies moving to Texas were from California.
Over eight years, the Texas Enterprise Fund has paid almost $490 million to more than 100 companies that promised to create jobs if they got subsidies. Understandably, as soon as Connecticut and other states began passing gun-control legislation, Perry went to a National Rifle Association gathering to say his state welcomes weapons makers.
“What states euphemistically call ‘business recruitment’ is often nothing more than the pirating of jobs by one state from another,” says Greg LeRoy in a report this year, “The Job-Creation Shell Game.” He adds, “This piracy is bankrolled by property, sales, and income tax breaks; land and infrastructure subsidies; low-interest loans; ‘deal-closing’ grants; and other subsidies to footloose companies.”
This month, LeRoy’s organization, Good Jobs First, put out another study, “Grading Places,” showing that the consultants who rate the so-called business climate of states often use phony statistics. Generally, these consultants concentrate on marking down states for their efforts to reduce inequality through such programs as the minimum wage. “Business climate studies must be viewed for what they actually are: attempts by corporate sponsors to justify their demands for lower taxes and to gain public-sector help suppressing wages,” says the new report.
Texas is the most rapacious state, but others, such as Georgia, Tennessee, and New Jersey, are big players. Rhode Island’s recent foray backfired ignominiously. Famed retired baseball pitcher Curt Schilling wanted to create a “massively multiplayer online role-playing” video game, according to Bloomberg News. But, says Bloomberg, “Schilling didn’t know the first thing about the world outside baseball.” He got Rhode Island to issue $75 million in tax-free bonds for his company. Schilling’s project bombed, the deal is under investigation, and current governor Lincoln Chafee called it “the worst investment that’s ever been made, I think, in the history of Rhode Island.”
States and municipalities toss out subsidies to keep wanderlust companies from leaving. Consider poor Illinois: it is broke, and one reason among several is its willingness to hand out prodigious subsidies, both to woo companies and to retain them. In 1989, it shelled out $168 million to keep ailing retailer Sears Roebuck from leaving. Twenty-three years later, Sears was back at the trough, threatening to depart; this time, it got $275 million and quickly laid off a slug of workers. In 2001, Illinois paid $56 million to get Boeing to move its headquarters from Seattle. Later, Illinois shelled out $165 million to keep Motorola Mobility and Navistar. These payouts have not created sufficient jobs: “Huge blackmail subsidies have left many taxpayers bitter,” says Good Jobs First, and neighboring Wisconsin and Indiana are trying to lure Illinois companies to their states.
Aerospace giant Boeing loves to rake in subsidy bucks. After taking money to move 500 jobs to Chicago, Boeing set up a 20-state bidding process for the plant that would build the plane now known as the 787 Dreamliner. The state of Washington didn’t want to lose again: Boeing wound up with $3.2 billion in tax cuts and credits. Some say Boeing never intended to leave Washington; it just wanted the loot. Then Boeing revealed plans to shutter its Defense, Space and Security plant in Wichita by the end of this year. The plant has been there 85 years. All told, Boeing has received more than $3 billion in Kansas subsidies.
California doesn’t play this jobs-thievery game. The state offers such things as a research and development tax credit and enterprise zones, which give employers money for each job they provide in so-called blighted areas. In his State of the State address early this year, Governor Jerry Brown expressed his dislike of enterprise zones, which he had unsuccessfully tried to eliminate two years earlier. Trouble is, areas designated as blighted are often actually upscale. And employers get paid for jobs they would create anyway. San Diego boasts of its enterprise zones, “but empirical research shows that enterprise zones don’t work,” says Vlad Kogan, who got his PhD in political science at the University of California San Diego and is now on the faculty of Ohio State University.
The City of San Diego touts its low business-license fees and lack of a utility users’ tax. Such lures “are not that significant to firms,” says Erik Bruvold, president of the National University System Institute for Policy Research. “In the end, the challenge for San Diego on the utility side is how high our energy costs are.”
The San Diego Film Commission, which offers financial incentives to those making movies in the area, has unimpressive economic wallop “because the crews come down from Los Angeles,” says Steve Erie, University of California San Diego political science professor. Also, “these are temporary jobs” for locals, he points out.
Sums up Bruvold, “San Diego would not be well-served to have tax rebates” and the like to attract and retain businesses, but places like Fresno or Bakersfield might benefit.