A new term has sprung up in the urban policy world: Buffalo Hunting. This describes when city chambers of commerce, economic development teams and city councils attempt to lure a major company to town through incentives. The incentives are the rocks and spears all the towns throw at the big buffalo. The jobs and investment the big company would bring is they meat those towns hope to retrieve from the hunt.
I have mentioned in previous posts the amazing work the New York Times did looking at “The United States of Subsidies.” In 2012, the Times spent ten months analyzing state, county and city economic development data to create a database of subsidies to businesses in America. Overall, Rhode Island spends $338 per capita on tax incentives to businesses, amounting to 11 cents per dollar of the state budget. To give some comparison, big spender Texas spends 51 cents per dollar of the state budget on incentives, $759 per capita. Our neighbor Connecticut spends $241 per capita, or 4 cents per dollar of the budget.
It is amazing how so many companies have become so skilled at playing municipalities against each other in order to get the sweetest deal. The companies minimize their tax burden by stressing how mobile they are. They could bring the jobs anywhere, but they would like to bring them to Providence. What will Providence give them in exchange? For example, Rhode Island waived property taxes for Providence Place Mall worth $72 million for the first 20 years of the mall’s existence, while the City of Providence waived $136 million in property tax over 30 years.
There are increasing calls for the federal government to begin regulating how companies seek incentives from local governments. Economic development is increasingly becoming a zero-sum game. If one town gets the jobs, other towns (either in the U.S. or abroad) lose them. Last year, in a major coup for South Carolina, Boeing moved to Summerville, S.C., just outside of Charleston. After years in Seattle, Boeing’s address on Google is now Charleston, S.C. Now, that piece of lobbying and development incentives did not go to creating jobs — it simply shifted the jobs from Washington State to South Carolina.
Jim Clifton, chairman of Gallup, wrote a book in 2011 called The Coming Jobs War. In the book, he argues that there is only a certain number of what he calls “formal jobs.” Countries are already competing to bring the best jobs to their own shores. The job shifting we now see in America — like Boeing’s transition from Seattle to Charleston — means that cities, towns, states, counties and even whole countries are offering incentives. This is how we get massive companies that pay no taxes. While I disagree with the premise that there is a ceiling on the number of jobs that can exist, I see Clifton’s point about how critical it is to really look at what we do to bring jobs to areas.
Cities and states need to help startups, not just existing companies. We need to create jobs, not just shift them around. I am sure the whiskey flowed freely in Charleston when Boeing decided to come to town. But while it was a win for South Carolina, it was wash for America.