The Wall Street Journal, a business-friendly publication, has for years
with little apparent success railed against various government
subsidies to private businesses. Officials at all levels of government
continue enamored of financial aid to enterprises within their
respective jurisdictions.
These subsidies come under numerous names and guises. A common form is the tax incentive financing (TIF). In this subsidy, some tax or other is waived in part or whole. The waiver is in exchange for job promises and/or location and build-up in a community or state.
Officials make much of these efforts when a company or business decides to locate or expand in their locale. They expect more jobs will evolve in the town and local merchants will benefit from the expansion of trade.
Close examination of these incentive deals indicate a mixed experience with TIFs and other government subsidies. All across the nation the Journal loudly notes devastating failures in these government-aided ventures. In some cases, the subsidies turn out to be nothing but outright gifts with no return to the grantors. In many other cases, the agreements had to be modified with a reduction in the jobs promised or new revenues expected.
Having often been bitten in these government finance deals, grantors of these subsidies eventually began to include “claw back” clauses in their awards of subsidies. In such clauses, the grantor attempts to reclaim some of the subsidy when the recipient abrogates the finance agreement in some respect. Good luck with “claw back” efforts if the particular business goes belly-up or runs off to reorganize in another state or country!
Here in New England, with its multiplicity of cities and towns, the “stealing or pirating” of industries from one another does not result in much real area job growth through TIFs. Because a firm relocates from one town to a nearby town does not mean that the firm’s employees also relocate or change their shopping habits. Only their commute changes, not their home ownership, or their children’s schools, or their restaurant/store preferences, or even the number of workers in an area.
Towns that have awarded singularly large financial subsidies to a major industry find themselves in great distress when that industry takes the tax benefit and subsequently abandons the town for better concessions elsewhere. Often such a town is left with “brown fields” to clean up, a burgeoning school population left behind, uncollectible property taxes on empty buildings, and a crushing infrastructure debt for improvements originally made to accommodate the particular industrial giant.
These subsidies come under numerous names and guises. A common form is the tax incentive financing (TIF). In this subsidy, some tax or other is waived in part or whole. The waiver is in exchange for job promises and/or location and build-up in a community or state.
Officials make much of these efforts when a company or business decides to locate or expand in their locale. They expect more jobs will evolve in the town and local merchants will benefit from the expansion of trade.
Close examination of these incentive deals indicate a mixed experience with TIFs and other government subsidies. All across the nation the Journal loudly notes devastating failures in these government-aided ventures. In some cases, the subsidies turn out to be nothing but outright gifts with no return to the grantors. In many other cases, the agreements had to be modified with a reduction in the jobs promised or new revenues expected.
Having often been bitten in these government finance deals, grantors of these subsidies eventually began to include “claw back” clauses in their awards of subsidies. In such clauses, the grantor attempts to reclaim some of the subsidy when the recipient abrogates the finance agreement in some respect. Good luck with “claw back” efforts if the particular business goes belly-up or runs off to reorganize in another state or country!
Here in New England, with its multiplicity of cities and towns, the “stealing or pirating” of industries from one another does not result in much real area job growth through TIFs. Because a firm relocates from one town to a nearby town does not mean that the firm’s employees also relocate or change their shopping habits. Only their commute changes, not their home ownership, or their children’s schools, or their restaurant/store preferences, or even the number of workers in an area.
Towns that have awarded singularly large financial subsidies to a major industry find themselves in great distress when that industry takes the tax benefit and subsequently abandons the town for better concessions elsewhere. Often such a town is left with “brown fields” to clean up, a burgeoning school population left behind, uncollectible property taxes on empty buildings, and a crushing infrastructure debt for improvements originally made to accommodate the particular industrial giant.
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