Should Chase Bank get big government subsidies?

From the article, your use of "big government" is a bit misleading... this isn't something coming down from a national level - this is a negotiation between city and state levels and the company.

Tax breaks like this are actually very common in industry - whenever a company is planning on building a new production plant or offices, they explore several sites and cities attempt to win them over with perks like this. Such companies bring employment and new money to the area, which ultimately helps the citizens and the city.

IMO, this isn't really news worthy on a national level, except for the fact that it's centered around ground zero. Let New York do what it thinks best, it doesn't really effect me.

 

It may not be right for New York, as the city attracts big corporations regardless. However when you consider other, smaller cities, wouldn't you say this practice is in the best interest of the citizens? Say you have some small city in the Midwest somewhere that gives Ford a ton of tax breaks and such (basically everything that's described in this article) if they build a plant in the city. Ford agrees, builds the plant, and brings 2,000 new jobs to the area. New people move there, new businesses open up to meet the increased demand. The citizens are happy because there are more job opportunities in their small town. Ford is happy because it got a ton of tax breaks. The city is happy because the increased taxes they get from the other new businesses and from the employees of the plant more than offset what they gave to Ford.

In another situation, lets say that GM has two plants relatively near each other (within a couple of hours drive) and decides that it needs to close one. It goes to the unions to get concessions, and doesn't get too much... but one city is willing to shell out more to keep the plant open than the other city. So by giving GM tax breaks and such, the plant stays open and their citizens stay employed.

Like i said before, this is a very common practice. In some situations, it has clear benefits to the citizens, the city, and the community. In other situations the benefits might not be as obvious, or lacking entirely. I really can't say what the benefits might be for New York, as i don't live there and won't be effected by it...

 

<div class='quotetop'>QUOTE(jared2 @ Apr 26 2007, 10:45 AM) [snapback]430519[/snapback]</div>

No its not right, but it is commonly done. There are thousands of companies that shop around for tax breaks even if the companies are profitable. Yeah, the individual community might gain from the companies presence even with subsidies, but the larger effects are negative, except for corporations' executives and owners/shareholders. This has led to industry paying fewer and fewer local and state taxes as a whole, and has led to taxpayers to pay more from income taxes, sales taxes, and property taxes. So in the end, middle income earners pay more taxes so that wealthier executives and shareholders can earn more money (simple conclusion, but fairly accurate). The only way to stop this raping of individual taxpayers for the benefit of wealthy corporations is to enact laws on the federal level. Individual cities and states would be acting against their percieved own interests if they acted alone. I cringe everytime I read about another company asking for local tax breaks and similar subsidies (in my locale, lately it has been the highly profitable companies like Target, Thompson Publishing, and Mall of America that have been crying for unneeded tax breaks - and they usually get what they want, stupid pieces of trash).

 

<div class='quotetop'>QUOTE(eagle33199 @ Apr 26 2007, 11:09 AM) [snapback]430550[/snapback]</div>

I don't buy the argument. The community might win, the corporation wins, but taxpayers everywhere lose. If a company shops for incentives and pins Community A against Community B and community B wins, the community might benefit in the ways you said, but the bottom line is that the company was going to open the plant somewhere anyways. So lets say that there was no incentives, the company would still build the plant. If they decide to build in community B, then community B gets all of the benefits they would get beforehand AND the additional tax revenue from the actual company. If community A wins, then they would get all benefits AND the additional tax revenue from the company.

So sum the parts:
With incentives and B wins plant

Community B
Company taxes: 0 money units (MU)
Residual growth: 100 MU
Community A
Company taxes: 0 MU
Residual growth: 0 MU
Sum of total Benefit: 100 MU

Without incentives, and A gets plant
Community A
Company taxes: 100 MU
Residual growth: 100 MU
Community B: 0 MU
Sum of total benefit: 200 MU

Individuals acting in their own self interests do not equate to the best interests of the entire community. That is why there needs to be federal laws, so the entire country benefits as a whole.

 

Corporations play local or state governments off against each other. These governments, by playing the corporations' game, screw themselves in the long run, as collective corporate taxes go down and down.

It's exactly analogous to workers under-bidding each other for jobs. The worker who gets the job may feel lucky to have "won" because he now has an income. But the overall level of wages is lowered and all workers make less money. In the opposite case, where workers unionize, they all make more money

In the case at hand, all communities get less tax from corporations because each is trying to shaft the others. Communities need to act like unionized workers so that all corporations, across the board, have to pay their fair share of taxes.

And to add insult to injury, these tax breaks are often given away without any formal, legal obligations on the part of the corporation, so that when another community offers a better deal, the corporation can often take tangible benefits with it and run.

 

Funny this popped up in my email box while reading this thread....

Weighing the economic impact of big-box development

 

<div class='quotetop'>QUOTE(mao @ Apr 26 2007, 12:18 PM) [snapback]430562[/snapback]</div>

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<div class='quotetop'>QUOTE(MarkMN @ Apr 26 2007, 11:31 AM) [snapback]430575[/snapback]</div>

You are completely correct, in that overall the country loses. However the local governments don't really care about the big picture - they're beholden to their tax payers, and are trying to do the best for those individuals, not the country.

To draw an analogy, this is very similar to items like protective tariffs. Such tariffs, while they may help industries in the US and protect the US workforce, are extremely bad for the global economy. All we can really expect is that the government (on any level) is going to attempt to do (or appear to do) whats best for those people it's beholden to - thats how officials are reelected. The smaller the scale, the more accountable an elected official is to his citizenry.

So in your example, it's true that overall things are better without the tax incentives. However, if B refused to give incentives and the plant went to A, then the citizens in B are going to be ticked off and elect other officials, ones that run on a platform of bringing new jobs to the area.

It's a vicious economic cycle thats repeated in a large number of situations (and is well understood through the application of Game Theory). The only possible way to prevent such a cycle is to enact laws at a higher level. And that won't happen, because the companies would be ticked off and the politicians wouldn't get their perks from them.