Coronavirus Hasn't Stopped Bad Local Tax Deals

Corporate giveaways wait for no pandemic.

Before we get into this post, my book, The Billionaire Boondoggle, makes for good reading while practicing social distancing, so if you don’t have a copy, grab one here or at your local independent bookstore. My friends at East City Bookshop and Solid State Books in D.C. are shipping and delivering books still, so those are great spots to buy one — or any other book — if you’re able.

I’ve been putting a lot of focus on the coronavirus response effort in Congress recently, even though this newsletter usually spends a lot more time on state and local policy and politics. Since the federal economic rescue package has the potential to reshape huge swathes of the economy — and has some huge problems — I hope you’ll forgive the temporary emphasis on Capitol Hill.

But I don’t want you to think I’ve neglected boondoggles at the state and local level. So here are four things I noticed that all occurred during the coronavirus outbreak and response. I’m sure there are more. Leave a comment or send a message with anything I’ve missed.

• Houston, Texas, approved a $43 million tax break for a luxury hotel. As I’ve explained here and elsewhere, tax breaks for hotels do not provide the advertised economic impact.

• Cleveland, Ohio, approved $100 million for a new Sherwin-Williams headquarters. That’s one third of the cost for a company already headquartered in the city. Brecksville, Ohio, also provided $100 million for the company’s new R&D facility.

• Missouri put nearly $6 million in tax breaks toward a new Major League Soccer stadium. The soccer subsidy boom continues.

• Tesla CEO Elon Musk is setting up an auction in the Midwest for a new “gigafactory.” For the last such factory, Musk managed to sucker Nevada into paying through the nose by playing other states off against it, even though it was apparent that Nevada was the desired location all along.

There are two big reasons why this kind of stuff — which may seem small ball in the context of a global pandemic and trillions of dollars pouring out of Washington — is still important.

First, the pandemic is going to ravage state and local budgets, as cities and states not only have to spend big on the public health response but on their own economic rescue efforts. And since nearly every state and city needs to have a balanced budget, unlike the federal government, every dollar blown on corporate giveaways is now one more dollar that needs to come out of, say, education spending, in order to respond to the virus.

Ohio Gov. Mike DeWine is already talking about cutting the state budget by 20 percent due to coronavirus response. Yes, there was money provided to states and cities in the federal rescue package, and it will help, but for many states it’s not nearly enough.

Second, there’s simply no getting around the fact that a lot of small businesses are getting pounded by forced closures and social distancing due to coronavirus. When this is all said and done, many may not open again. And big corporations that benefited from federal bailouts will be ready to swoop in and offer to replace those jobs that have been lost — for loads of new tax breaks and other favors. If big companies already have a leg up over small businesses thanks to previous tax deals, the competition to win back market share is going to be even more tilted toward the big guys.

It’s very unclear at this moment what coronavirus will mean long term for the economy. But corporations hoovering up resources in the midst of the crisis won’t help move things in the right direction.

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— Pat Garofalo