2020 Democratic Debate Prep

Where do the candidates stand on corporate tax boondoggles?

This post has been updated for the October 15, 2019 Democratic primary debate.

In October, 12 candidates for the 2020 Democratic presidential nomination will hit the stage for a debate. Most of the corporate tax boondoggle-related issues this newsletter covers are of the state and local variety, but a few do make it up to the national level, and some candidates dealt with them in other, lower offices, so I thought it’d be worthwhile to document where they all stand.

To make it a little more interesting, I’ve surveyed not just corporate tax incentive issues such as Amazon’s HQ2 and sports stadiums, but also the candidates’ general approach to corporate taxes. Since the 2017 Trump tax cut included a big reduction in the top corporate income tax rate — from 35 percent down to 21 percent — that’s the area in which the most candidates have a concrete policy. (Trump is awful on all things corporate taxes, which I will address in a future issue.)

If I missed anything, please let me know in the comments or via email. I’ll send out updates as the primary season moves forward. These are in the order of the most recent Real Clear Politics polling average.

Former Vice President Joe Biden: Biden hasn’t had much to say about state or local corporate tax incentives. When he was a senator, he represented Delaware, a notorious corporate tax haven, and didn’t do anything to make it less so. He did at one point ding the state’s “ghost corporations” in an op-ed, so I guess that’s something.

On corporate taxes in general, Biden has called for partial repeal of the Trump corporate tax cut, setting the rate at 28 percent. He’s also criticized the low tax rate some companies pay, including Amazon.

Sen. Elizabeth Warren: Warren cheered the news that Amazon had decided to pull out of its HQ2 deal with New York City, saying, “one of the wealthiest companies on the planet – just walked away from billions in taxpayer bribes, all because some elected officials in New York aren't sucking up to them enough. How long will we allow giant corporations to hold our democracy hostage?” She then held an event calling for the breakup of big tech companies on the site Amazon would have built on.

Warren has proposed a new form of corporate taxation above and beyond the corporate income tax that would be based off the profits big corporations report to investors. It’s an attempt to get at the fact that some corporations are able to pay little to nothing in taxes while reporting big profits, thanks to accounting chicanery. It would apply to corporations with more than $100 million in profits.

Sen. Bernie Sanders: After Amazon decided to reverse its decision to put a new headquarters in New York, Sanders said, “Our job is to end the race to the bottom where taxpayers in one city or state are forced to bid against each other for desperately needed jobs.” No word on how he plans to accomplish that, however.

Sanders very consistently – on the stump, in media appearances, and in previous debates – calls for higher corporate taxes. He also calls out tax-dodging corporations on a nearly everyday basis.

To that end, the day before the October debate, Sanders released by far the most detailed and far-reaching corporate tax plan of the candidates. It calls for full repeal of the Trump tax cuts — returning the corporate tax rate to 35 percent — and for eliminating many of the loopholes that allow companies to lower their tax bills.

It would renew the taxation of offshore profits of American companies, which the Trump tax bill eliminated. It would also do away with what’s known as the pass-through deduction, which allows many companies large and small to avoid paying the corporate tax by “passing through” their profits to their owners.

All in all, it’s a super impressive plan.

Mayor Pete Buttigieg: As mayor of South Bend, Indiana, Buttigieg employed a hefty dose of tax incentives to help his urban renewal projects. According to Good Jobs First, corporations there have benefited from about $48 million in state and local incentives, the vast bulk of that since 2012, when Buttigieg took over.

To be fair, most of that money is from state programs, but the city itself does throw around plenty of property tax reductions and other subsidies for things such as luxury condo buildings and apartments outside of minor league ballparks. As is often the case, the cost of these deals can get astronomical: One will cost South Bend some $7.6 million for just 62 jobs.

Here’s a good piece about why the strategies Buttigieg employed are not just problematic on their own terms, but not replicable in other cities that don’t have South Bend’s big advantage: A super famous university, Notre Dame, next door.

On a national level, there’s not a whole lot of specificity to Buttigieg’s corporate tax plans. He mostly handwaves about closing unnamed loopholes.

Sen. Kamala Harris: Since Harris was California attorney general before running for the Senate, there’s not a whole lot of tax policy positions in her past. That said, Harris has explicitly endorsed a full repeal of Trump’s corporate tax cut, with the rate returning all the way back to 35 percent. Like Sanders, she has backed once again taxing offshore profits of American-based companies.

Businessman Andrew Yang: Yang has lots of policy plans on a variety of topics, and one of them explicitly calls for ending the practice of cities and states using corporate tax breaks to entice in new businesses. “This form of corporate welfare needs to stop, and only the federal government has an incentive to do so. We must end it by considering any financial benefit provided to a company to entice local investment, or relocation, to be special income that is taxed at 100%. General investment by a locality to be more business-friendly is fine, but no more bribing companies to do something they were already planning to do,” he says.

That’s pretty much spot on, though untangling “general investment to be more business friendly” from more direct subsidies probably isn’t as easy as he makes it sound. Nevertheless, it’s the most straightforward anti-boondoggle policy plank of the candidates on stage. Thanks Andrew Yang!

He has also called for taxing tech companies that automate jobs in order to pay for his signature policy proposal, a universal basic income.

Former Rep. Beto O’Rourke: When he was on the city council between 2005 and 2011, O’Rourke’s hometown of El Paso made a habit of handing out multi-million dollar tax credits to corporations in the name of economic development. He also backed a controversial development plan there that involved a hefty dose of redirecting property taxes back to the area around the companies that paid them. And he’s an investor in a family project embroiled in a property tax dispute with the city; these sorts of suits cost cities big money, because they either have to forego property taxes they’re likely due, or waste time and resources fighting for those taxes in court.

During the campaign, O’Rourke has called for raising the corporate tax rate back to a 28 percent rate and for closing various oil industry loopholes in order to pay for his climate change plan.

Sen. Cory Booker: Buckle up, this one’s bad. As mayor of Newark, New Jersey, Booker relied heavily on tax incentives to bring businesses into the city, including a $200 million deal with Prudential, despite the obvious underinvestment in critical city infrastructure.

As I reported in an earlier newsletter, Booker defended New Jersey’s thoroughly corrupt and ineffective corporate tax incentive programs during a recent Q&A session with the Working Families Party. The level of corruption in New Jersey’s programs is cartoonish, but still, Booker can’t say a bad thing about them. He also backed New Jersey’s $5 billion plan to bring Amazon HQ2 to Newark. On this issue in particular, he’s the worst in the debate.

More broadly, Booker has criticized companies like Amazon that pay no federal taxes and has called for repealing the Trump tax cuts.

Sen. Amy Klobuchar: Fun fact: Klobuchar wrote an entire book, published in 1986, about the deal to build a new football stadium in Minneapolis with $55 million in taxpayer funds, using it as a case study in how private interests take advantage of the political system. Alas, she didn’t really apply those lessons to the construction of that stadium’s successor, U.S. Bank Stadium, which she celebrated after it received half a billion dollars in public money.

Klobuchar has called for raising the corporate income tax rate back up to 25 percent, with the proceeds directed toward infrastructure, and has done some work on cracking down on corporate tax havens.   

Former HUD Secretary Julián Castro: Another not great entry for a former mayor. (Sensing a trend?)

As a member of the San Antonio city council, he was against a PGA golf resort and the subsidies it received before he was for it; critics attribute the flop-flop to his desire to cultivate business ties for a run for mayor. The city also threw some absolutely monstrous tax break deals at big corporations, including a $133 million deal with Toyota. ($60 million of that was from the state, and the rest came from the city and county.)

When he was mayor of San Antonio, he “gave hundreds of millions of dollars in tax breaks and fee waivers to developers, who primarily built luxury condos and apartments in one of the most economically segregated cities in the country.” He has said the negatives of that experience informed his work when he moved on to be President Obama’s Secretary of Housing and Urban Development.

At the federal level, Castro has called for repealing the Trump tax bill entirely, which would bring the top corporate tax rate back to 35 percent.

Rep. Tulsi Gabbard: Gabbard said New York “dodged a bullet” by not paying up for Amazon’s HQ2. But she doesn’t talk about corporate taxes a whole lot otherwise. When she does, it’s to take standard Democratic positions against the Trump tax cuts and corporations using loopholes to lower their effective rates.

Tom Steyer: Steyer talks a lot about ending the “corporate takeover” of Washington, but he means it in a money-in-politics way, not a taxes way. He’s endorsed a full repeal of the Trump corporate tax cut, though.

Again, if I missed anything, let me know!

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