You Pay The Taxes They Don't

After too many years of zero local and state taxation for multi-million and billion dollar corporations, mislabled as "development and recruitment incentives", many in the public and judicial sector are beginning to see the light. The myth that "incentives" add to economic development don't hold up.

This doubt of course has put fear in the heart of lobbying groups like the Chamber of Commerce, who help to both craft the free ride on taxation and define their usefulness as "recruiters." A story in Sunday's Kingsport Times-News notes that Tennessee business groups and Chambers of Commerce are providing financing and legal briefs for a case in Ohio regarding Daimler-Chrysler against these tax freebies that's headed to the Supreme Court, and Tennessee state officials are consulting as well.

Tax Increment Financing (TIF) districts were established some 50 years ago to bring economic development to "blighted" areas. Today, it's a tool to seize private property and freeze tax payments for decades for enormous corporations. But more study has shown that the real costs created for communities - expanding roads, building schools, creating utilities like sewer, water and electric needs - are shifted from business to the private sector.

Reason magazine, in a recent report (which deserves your full reading) notes:

"At a time when local governmentsÂ’ efforts to foster development, from direct subsidies to the use of eminent domain to seize property for private development, are already out of control, TIFs only add to the problem: Although politicians portray TIFs as a great way to boost the local economy, there are hidden costs they donÂ’t want taxpayers to know about. Cities generally assume they are not really giving anything up because the forgone tax revenue would not have been available in the absence of the development generated by the TIF. That assumption is often wrong.

"There is always this expectation with TIFs that the economic growth is a way to create jobs and grow the economy, but then push the costs across the public spectrum,"” says Greg LeRoy, author of The Great American Jobs Scam: Corporate Tax Dodging and the Myth of Job Creation. "“But what is missing here is that the cost of developing private business has some public costs. Road and sewers and schools are public costs that come from growth.” Unless spending is cut —and if a TIF really does generate economic growth, spending is likely to rise, as the local population grows —the burden of paying for these services will be shifted to other taxpayers. Adding insult to injury, those taxpayers may include small businesses facing competition from well-connected chains that enjoy TIF-related tax breaks. In effect, a TIF subsidizes big businesses at the expense of less politically influential competitors and ordinary citizens."

At a recent meeting of the Hamblen County Commission, one wise citizen asked commissioners and Property Tax Assessor Keith Ely just what tax breaks and incentives were being given a new projected development by the Colgate Company in Morristown. No one had any information. While it is a city industrial project, led by the state and the local chamber of commerce offices, that information is yet to be revealed. Typically, TIFs could range from seven to 30 years. All infrastructure needs created for schools for example, will be funded by the county, or in other words, the rest of the taxpaying public.