Both states and localities can curtail job piracy

Does anybody like job piracy? By that we mean tax breaks and subsidies to a few corporations for the supposed purpose of enticing them to move jobs from another jurisdiction.

As Good Jobs First points out, these subsidies are “wasteful because the costs are high and the benefits are low: a tiny number of companies get huge subsidies but the net impact of interstate job relocations is microscopic. It is [also] incredibly unfair to [all the other local] employers….”

We can curtail job piracy. All it takes is some political will and the Job Piracy Cease Fire Act, which is a binding offer from any state or locality saying, in effect, our jurisdiction won’t steal jobs from yours if you promise the same back to us.

Such a policy is completely practical. Take Kansas and Missouri for example.

Over the past few years, a group of 17 prominent Kansas City area business executives have argued that the states of Kansas and Missouri should stop stealing jobs from one another. The business leaders said, in part:

At a time of severe fiscal constraint, the effect to the states is that one state loses tax revenue, while the other forgives it. The states are being pitted against each other and the only real winner is the business who is “incentive shopping” to reduce costs. The losers are the taxpayers who must provide services to those who are not paying for them.

In 2014, the Missouri legislature enacted a law offering a job piracy cease fire to the state of Kansas. Kansas Governor Sam Brownback initially responded that he wasn’t interested. But just recently, Brownback changed his mind and released a public directive to his commerce secretary to put steps in place to end the Kansas-Missouri “Border War.”  Brownback wrote: “I have determined to stop providing incentives to businesses that move back and forth across the border merely to access economic development incentives.” 

These Kansas City companies are not the only ones interested in reducing the use of economic development incentives, as proven by the results of a national survey of small business organizations published by Good Jobs First. Forty-one leaders of small business organizations representing 24,000 member businesses in 25 states were surveyed and 92 percent believe that state economic development incentives are biased towards big businesses. Furthermore, in addition to believing their state’s incentive policies are unfair, 72 percent do not believe these policies are actually effective in promoting economic growth.

Another report by Good Jobs First discusses the more general problems of interstate job fraud that is perpetuated through the unfair distribution of economic development subsidies to recruit businesses. The report notes that these policies are “incredibly unfair to in-state employers, who are forced to pay higher taxes or suffer lower-quality public services (or some of both) when newly arriving companies are excused from paying their fair share of taxes.” This fraud is also perpetuated by public officials who claim to be bringing “new jobs” to the state when, in fact, these jobs already existed, a practice Good Jobs First calls a “shell game.” The report exposed this kind of shell game taking place in multiple states across the country including Kansas, Missouri, Texas, New Jersey, New York, Georgia, Tennessee, Mississippi, North Carolina, South Carolina, Ohio, Illinois, Rhode Island and Massachusetts.

Forty states already refuse subsidies for intrastate relocations of existing jobs. It shouldn’t be hard to expand this common sense policy and instead focus on creating real new jobs that grow local economies.

 

(PLI’s Hannah Miller and Janessa Sambola contributed to this blog.)


Download Books