Corporate Welfare Weekly - February 15, 2010 – Issue 37

 

Recent Announcements…

 

Governor Perdue announced on Thursday, February 11, that Laboratory Corporation of America(LabCorp) will open its consolidated billing operations center by the second quarter of 2010. Back in November, the City of Greensboro approved $373,000, Guilford County approved $248,791, and Perdue provided $275,000 from the state.

                ~ Staff Reports, News & Record, February 11, 2010

 

Local incentives have been approved for a packaging company, Bradman Lake Inc., to relocate from south Charlotte to, well, somewhere else in Charlotte. The Rock Hill City Council agreed to provide rebates on the first five years of property taxes. Last year, York County agreed to a 45% tax break on machinery if the company relocated.

                ~ Charlotte Business Journal, February 10, 2010

 

$1,500,000 in total incentives has been approved by the City of Charlotte and Mecklenburg County for two Augusta, GA-based companies relocating to Charlotte. The two matching grants were approved without debate. Electrolux Home Products Inc. will be awarded $1.28 million with the city’s share at about $450,000. The local grant for Husqvarna is approximately $240,000 over five years with the city’s share at $85,433.

~ Susan Stabley, Charlotte Business Journal, February 9, 2010

 

In addition to the above incentives, Electrolux was awarded $1.2 million from the One North CarolinaFund as well as $25 million in JDIG tax credits. Husqvarna was granted $2.5 million in JDIG tax credits.

 

Quotes of the Week…

 

“One thing that governors and mayors absolutely love to do is win a prize in the national game called ‘Corporate Welfare Roulette.’ It's a simple casino-style game in which politicos put down a big stack of taxpayers' money on an out-of-state corporation as an ‘incentive,’ hoping that their bet outbids other states and cities trying to lure that same corporation to move to their area and hire some people.

 

There's always a celebration when politicos ‘win’ one of these cash-for-jobs gambles. The media gather, politicos prance, the Chamber of Commerce chief grins from ear to ear and the corporate CEO mouths platitudes about free enterprise (while stuffing taxpayer cash in his pockets).

 

… the roulette wheel continues to spin, and more and more taxpayers across the country are learning that they're getting stiffed, receiving only a fraction of the jobs they were taxed to bring to their area.”

~ Jim Hightower, a national radio commentator, writer, public speaker, and author of the book, “Swim against the Current: Even a Dead Fish Can Go with the Flow.” This quote was taken from Hightower’s February 10 op-ed entitled Corporate Welfare Roulette.

 

Hightower, a progressive populist, may not be against corporate incentives for the same reasons as a conservative republican, but it shows the opposition against the practice is widely bipartisan.

 

“I am concerned that some of the efforts underway utilizing run ‘covered-over’ funds could result in a significant shift in the assistance the U.S. Government provides the territories and a massive subsidy to one rum producer, creating an unequal playing field in what is now a competitive market.”

~ U.S. Senator George S. LeMieux from Florida regarding the U.S. Virgin Islands incentives deal with Captain Morgan’s Rum manufacturer and the effect the deal will have on Puerto Rico. The quote was taken from a letter Lemieux wrote to the Senate Chairman Baucus and Ranking Member Grassley on January 26, 2010 regarding the matter.

 

$2.7B corporate giveaway to Captain Morgan to gain 40 jobs, but lose 400!

 

A wine, beer, and spirits manufacturer, London’based Diageo, LLC  is about to take advantage of an incentives deal offered by the U.S. Virgin Islands. It is a deal the Captain Morgan Rum manufacturer can hardly resist. The rum manufacturer’s current operation is located in Puerto Rico. Rafael A. Fantauzzi, President and CEO of the National Puerto Rican Coalition, (NPRC) issued a press releaseexplaining how this incentives deal will devastate Puerto Rico and calls on the U.S. Senate to intervene.

 

“With nearly half its residents living below the poverty line, if Puerto Rico were a state, it would be the poorest in the union. Its per capita GDP is significantly less than Mississippi’s and unemployment hovers around 15%.

 

Yet, as a Territory, it’s ineligible for much of the federal aid states receive. The most recent Census figures confirm that it gets $4,260 per person in federal spending compared with $8,339 for the average state.

 

To help make up the difference, Washington has allowed Puerto Rico and the Virgin Islands to keep the federal excise taxes collected on the rum each of them produces -- last year, about $370 million that helped build clinics and schools and pay the salaries of teachers, nurses and librarians. Since 1917, the rum tax rebates have also preserved 18,000 acres of land on the island.

 

It’s against this backdrop that a British liquor conglomerate, Diageo, is staging a raid on Puerto Rico’s rum tax rebates.

 

For several years, the USVI [U.S. Virgin Islands] has sought to lure away one of Puerto Rico’s best-selling rums, Captain Morgan – and with it, the rum tax rebates from its sale. Last summer, the USVI offered Diageo a deal that’s hard to turn down: almost half the rum taxes collected on the sale of the popular Captain Morgan Rum for the next 30 years – about $2.4 billion.

 

Under the deal, the USVI will use its future rum tax revenues to finance construction of a state-of-the-art distillery on St. Croix, plus give back at least 43% of future rum tax revenues for ‘marketing support’ and ‘production expenses.’ That’s in addition to a 90% corporate income tax break and a full exemption for property and gross receipts taxes.

 

What will American taxpayers get back in return? No more than 40 jobs at Captain Morgan’s newSt. Croix distillery, not a single one required to be paid above minimum wage.

 

Meanwhile, the Puerto Rican rum industry would be decimated. Captain Morgan’s existing distillery will have to lay off upwards of 410 workers, many of whose families have worked there for generations.

 

… The lavish benefits being financed by the rum tax rebate are just one more example of U.S. tax dollars being siphoned off from people who need it to corporations that don’t – in this case, a British conglomerate.

 

The deal also threatens to touch off a bidding war between the two Territories that could jeopardize the 92-year old rum tax rebate itself. After all, if 50 cents of every excise tax dollar sent to the islands is being funneled back to the distillers themselves, what’s the point?

 

The deal also puts the U.S. government in the position of subsidizing one brand at the expense of the others.

 

Captain Morgan is already the second-biggest seller of rum in the United States, with a rapidly-rising share of a growing rum market. With a multi-billion-dollar package of marketing and tax subsidies, it would have an enormous market advantage over all of its competitors -- one that’s funded by tax dollars.”

 

 

Senate intervention?

 

In response to the desperate plea from the NPRC, U.S. Senator George S. LeMieux of Florida wrote aletter to Chairman Max Baucus and Ranking member Charles Grassley, calling on them to intervene in the matter.

 

While this example represents a much larger national problem and is beyond the traditional scope of this newsletter, it can be a valuable lesson to our state and local representatives. When governments get too involved in business decisions and attempt to manipulate those decisions with monetary enticements, they distort the market by unfairly picking winners and losers and the effects of these distortions can do much more harm than good. 

 

Reminder…

 

The Corporate Welfare Weekly recently launched an effort to identify ANY company doing businesses in North Carolina who plans to expand, relocate within the state, or simply create new jobs – but ISN’T getting any incentive from the state or local government.