January 5, 2011
David Cay Johnston — he just has a way of putting things so even dummies like me can understand.
What if the government passed a law requiring every business to pay a tax except your competitor’s business? ……That kind of government meddling in the market goes on every day in America.
Johnston goes on to tell us just how that happens —— and how much it’s costing state and local governments (estimated at $70 billion per year, a number he thinks is low), and the “harm they are doing”.
We already knew a lot about how taxpayer money is used to subsidize corporate America. But we’ll never know all of it. These deals are made behind closed doors and given names that would make one think the money was being spent to feed the hungriest people on earth.
Johnston takes a lot of what he’s written about from a book by Prof. Kenneth P. Thomas titled Investment Incentives and the Global Competition for Capital.
Any thought that giveaways of tax dollars stimulate foreign investment in America is demolished by a little table on page 101 of Thomas’s book. It shows that between 1985 and 2007, the American share of global direct investment fell by two-thirds, from 36.7 to 12.7 percent. However, in the 15 more-developed EU countries where subsidies were few, the share of foreign direct investment increased from 28.6 to 40.3 percent.
But what takes the breath away is the increasing size of the welfare given big businesses as governments compete to shower gifts on companies with capital to invest, even when it means hardly any new jobs.
For example, the state of New York gave away $268 million in subsidies to Yahoo for building a storage facility in that state in the name of “job creation”. In return, 125 jobs were created. They did the same thing for Verizon, but at a much bigger cost; $614 million. For that, the state got 200 jobs. That’s a total of 325 jobs at a cost of $3.1 million for EACH JOB created, which, by local estimates, would take a minimum of 32 years for local salaries to equal the cost of the giveaways. So ask yourself; does any of this make sense?
Of course it doesn’t make sense! So why do lawmakers give away taxpayer dollars this way? It’s simple: campaign contributions — and the hope of a very big salary when they leave public service.
Never underestimate the difficulty of changing false beliefs [with] facts.
Economist Henry Rosovsky