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The Leaflet: Corporations Are Welfare Recipients, Too

November 16, 2018

Amazon decided to split its second headquarters between two coastal financial and political centers in the United States. Both cities offered the e-commerce giant lavish economic incentives that many liken to corporate welfare.

A year after Amazon waged a national bidding war among more than 200 American cities vying to become its second headquarters (HQ2), the online retail giant finally crowned the victors: Long Island City, New York, and Arlington, Virginia. No doubt, greater profits and political influence factored into Amazon’s awarding two up-and-coming coastal cities within a stone’s throw of the financial and political centers of the United States.

According to Amazon, a primary factor was the ability to attract highly-skilled labor—economic incentives were a secondary factor. However, many municipalities offered Amazon multi-billion dollar economic packages consisting of tax exemptions, development grants, prime real estate, and other taxpayer-subsidized corporate goodies.

For example, Maryland lawmakers approved an $8.5 billion tax-incentive package that included $2 billion in infrastructure and transportation improvement. Newark’s city council, in conjunction with New Jersey state officials, offered $7 billion in state and city tax exemptions. Dallas officials even crafted plans to construct a $15 billion bullet train, a 240-mile line from Houston to Dallas. In comparison, the Long Island City and Arlington bids were relatively modest ($1.5 billion in subsidies from New York and $573 million from Virginia).

What benefits did Amazon promise that drove lawmakers to offer such lavish economic incentives? Amazon estimates the new locations will produce $5 billion in local business investments and 50,000 full-time jobs with average salaries of $150,000. In other words, Amazon dangled one of the largest corporate development investments in American history.

Despite Amazon’s rosy projections, economists, policy researchers, and even some politicians question the wisdom of doling out huge economic incentives—also known as “corporate welfare”—to mega-corporations such as Amazon, which raked in $180 billion in revenue last year. In fact, the agreed-upon incentive deals will cost New York taxpayers $48,000 per HQ2 job and Virginia taxpayers $22,000 per HQ2 job.

Although the immediate benefits of winning the corporate giant’s headquarters are obvious, many policy analysts warn about corporate welfare’s potential consequences. Michael Farren and Anne Philpot, researchers at the Mercatus Center, contend cities and states are “throwing their money away” when they participate in economic development schemes. After analyzing several studies, they concluded economic incentives for businesses, especially for major corporations, are based on short-term political gains—not long-term economic benefits.

Instead of rewarding giant companies with taxpayer dollars, state legislators should enter into interstate compacts that end corporate welfare. Funds earmarked for corporate goodies should be stopped altogether. Rather, lawmakers should make their states and cities more business friendly by reducing corporate income taxes, increasing tax-credit scholarships, and improving public services and infrastructure.

 

What We’re Working On

Budget & Tax
Lowering Professional Licensing Barriers for Ex-Offenders
In this Research & Commentary, Senior Policy Analyst Matthew Glans discusses how states are attempting to assist former offenders reentering society by reforming licensing barriers and ending blanket bans for some ex-offenders. “States should provide an environment in which all residents, especially offenders, can obtain work to provide for their families. By doing so, prosperity will increase, more jobs will be created, residents will return to the workforce, and less offenders will likely return to their criminal ways,” wrote Glans.

Health Care
Policy Tip Sheet: Pre-Existing Conditions
In this Policy Tip Sheet, Government Relations Manager Charlie Katebi explains how Obamacare weakened protections for patients with preexisting conditions, and how states can strengthen coverage for these vulnerable people. “There are far more effective ways to protect people with chronic illnesses than keeping Obamacare in place. Instead of Obamacare’s failing approach, states can deliver better and more targeted relief to vulnerable patients with pre-existing conditions by establishing reinsurance programs and high-risk pools,” wrote Katebi.

Energy & Environment
Big Win For Climate Sanity in the Midterm Elections
In this episode of the Heartland Daily Podcast, Director of Communications Jim Lakely speaks with Heartland Senior Fellow H. Sterling Burnett on how climate sanity prevailed over dogmatic climate alarmism in the 2018 midterm elections, as key ballot measures failed in numerous states. Voters in Alaska, Arizona, Colorado, and Washington State rejected policies that would have raised energy costs and limited the use of fossil fuels to fight climate change.

Education
92 Percent of Parents Satisfied with Florida’s Tax-Credit Scholarship Program
In this Research & Commentary, Policy Analyst Tim Benson writes about a new EdChoice survey of parents participating in Florida’s Tax-Credit Scholarship Program. The survey, reaching more than 14,000 participating parents, is the largest survey of private school choice participants yet produced, and revealed that 92 percent of parents are satisfied with the program, including 89 percent that are “completely satisfied.” Another 89 percent were satisfied with their choice school, including 72 percent completely satisfied and only 9 percent dissatisfied. More than 70 percent of parents responded their children would be attending a public school if not for the program. 

From Our Free-Market Friend
Fighting North Carolina’s CON
Dr. Singh, founder of the Forsyth Imaging Center in Winston-Salem, was prohibited from purchasing an MRI machine for his new imaging center in 2017. Why? Under North Carolina’s certificate-of-need (CON) laws, the state’s Department of Health and Human Services regulators determined that there were a sufficient number of MRI scanners already operating in Forsyth County. Jordan Roberts, policy analyst at the John Locke Foundation, argues that North Carolina’s CON laws are particularly restrictive and contribute to rising health care costs because they artificially keep out competition and suppress supply of much-needed health care goods and services.


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Author
Arianna Wilkerson worked in government relations at The Heartland Institute from 2017 - 2019.