As you file your taxes this week, before complaining about how much you’re forking over to Uncle Sam, bear in mind that the tax man might not be the only one you’re writing a check to: Your boss might be getting a big cut, too.
Thanks to arcane state tax subsidies, thousands of companies have fattened their profit margins by poaching from workers’ paychecks. According to a report by the watchdog group Good Jobs First, nearly $700 million in taxpayer money is being siphoned off by corporations annually through clever deals with state governments that are supposedly aimed at “job creation.”
According to the report, the tax breaks allow companies to effectively skim money from workers’ state income tax withholdings “to provide lavish subsidies to corporations rather than paying for vital public services.” The beneficiaries include “more than 2,700 companies, including major firms such as Sears, Goldman Sachs and General Electric.”
These programs feature glowingly euphemistic names: Indiana’s Economic Development for a Growing Economy (EDGE) Tax Credit, the Mississippi Advantage Jobs Incentive Program, and, to emphasize that these aren’t just any old jobs we’re talking about, New Mexico’s High Wage Jobs Tax Credit.
A more fitting title, according to Good Jobs First, would be “job blackmail.” Tax breaks are the trophy state lawmakers offer while trying to pull businesses into their states, or keep businesses from moving out. But while tax breaks are often painted as a mechanism for attracting jobs, they’re actually more aimed at attracting bosses. The researchers explain that in this interstate “economic war,” shuffling businesses geographically does not amount to genuine development:
For example, Kansas gave AMC Entertainment $47 million in PEAK subsidies last year to get the movie theatre chain to move its headquarters from downtown Kansas City, Missouri about 10 miles across the state line to suburban Leawood. In Illinois, Motorola Mobility (now part of Google) last year got state officials to provide $100 million in EDGE tax credits over ten years to keep its headquarters in the Chicago suburb of Libertyville.
And yet at the local level, the wealth tends to trickle upward, not down. Good Jobs First has documented that nationwide, numerous state corporate subsidy programs have failed to foster sustainable, living wage jobs.