Disney: The Greediest Place on Earth?
PLUS: A Minnesota Senator takes on Major League Baseball.
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In last week’s edition, I noted some reporting on a mystery tax break for Disney. The corporation said it was receiving something for moving 2,000 jobs from California to Florida, but nobody would cop to what exactly that something was.
Well, now we know — and hoo boy, is it a lot.
According to the Orlando Sentinel, which used a public records request to access the numbers, Disney is set to receive more than $570 million in tax credits over nearly two decades on an $864 million investment in the Sunshine State. The money will come from Florida’s Capital Investment Tax Credit program, which is used to entice corporations in a few particular sectors, such as energy and advanced manufacturing, to come to Florida, as well as for poaching corporate headquarters.
This is one of the worst corporate tax incentive deals in recent memory, for a bunch of reasons that I’ll explain. And it shows why an interstate compact amongst the states to prevent this sort of nonsense is so important.
For starters, the numbers here are truly wild: Disney could cover nearly two-thirds of the cost of its capital investment with public money, while the corporation estimates that 60 percent of the jobs created in its new space will be filled by current employees who relocate from California. So Florida is paying through the nose to poach employees from across the country, not create new jobs for Floridians.
Overall, Disney has received nearly $1.5 billion in state and local subsidies; this new haul will take it over $2 billion. California currently tops the leaderboard when it comes to giving the most to the Mouse, but Florida will overtake it once the new package is fully paid out.
California, in fact, should be a cautionary tale here. It has given nearly half a billion dollars in subsidies to Disney, only to see thousands of jobs vanish because another state came along with a major tax credit package.
I, of course, question whether it’s really necessary to pay Disney to expand in Florida, a state where it already has a major presence, including several massive theme parks. If executives were intent on leaving California, for whatever reason, where else would they realistically go, especially since a bunch of the jobs they’re moving are related to the theme parks themselves? Florida continues to plow money into both Disney and Universal, its other major theme park player, when there’s no real chance they would expand anywhere else.
As Orlando Sentinel columnist Scott Maxwell put it, “We’re constantly told Florida has the most envied business climate in America. So then why do we have to bribe companies to bring jobs here? Especially a company that's already here.”
Indeed, my reaction to the details of the deal can be summed up with this.
And it’s not like Disney is a consummate corporate citizen when it’s not playing states off against each other to access public dollars. In Florida, Disney execs spend their time fighting the company’s property tax bills, while in California, Disney is trying to find loopholes in a ballot initiative requiring that corporations receiving public benefits pay a living wage. And as Anaheim, California, experienced, Disney will absolutely get involved in political races in order to keep its subsidies flowing.
So much for the most magical place on Earth.
This deal is a perfect example of why state governments need to join together to prevent job poaching. It’s exactly this sort of arrangement — one state paying an absurd amount of money to purchase some economic activity from another, via a corporation that probably won’t go anywhere except those two states — that the interstate compact I write so much about is supposed to eliminate.
Florida had a bill in this year’s legislative session to join the compact, introduced by Democratic Rep. Anna Eskamani. California did not. Intel I’ve picked up from the California legislature is that pols there are very wary of anything that could interfere with their precious film tax credit program, which they recently decided to plow hundreds of millions of new dollars into — and which is used to steal productions from other states, as I noted in my book via a story about the show “Veep” ditching Maryland for the Golden State.
But if there were a compact in place, we’d see a much better economic competition between Florida’s low-tax regime, lax regulatory system, and better education rankings, and California’s broader safety net and bolstered protections for workers, albeit with a higher cost of living. Cities in both states would have to market themselves on what they could provide in terms of infrastructure, standard of living, and workforce, raising conditions for everyone.
Instead, we’re left with the two states spending huge amounts of money to shuffle jobs back and forth, undercutting revenues and therefore public services, and leaving corporations like Disney the only real winners.
ONE MORE THING: Miken Sports, a manufacturer of baseball equipment, recently announced plans to close a facility in Caledonia, Minnesota, and move its production to China. The company is jointly owned by Major League Baseball and a private equity firm, Seidler Equity Partners, where the owner of the San Diego Padres is a leading executive.
In a righteous letter, Minnesota Democratic Sen. Tina Smith noted that MLB has received a whole lot of support from taxpayers — and has a federal antitrust exemption — and in return is outsourcing jobs and causing economic heartache:
Major League Baseball and its teams, including the San Diego Padres, have benefitted from billions of dollars in state and local stadium subsidies, as well as federal tax breaks on stadium bonds. Further, MLB has long benefitted from an exemption from federal anti-trust law, and recently lobbied for a special carve-out from federal overtime rules that was ultimately tucked in a 2018 government funding bill. In exchange for these taxpayer-funded benefits and special exemptions, Americans should be able to count on MLB to, at a minimum, avoid being complicit in the offshoring of U.S. jobs to China. Unfortunately, MLB, in concert with Seidler Equity Partners, appears to be more focused on its bottom line than on honoring any commitments to American workers.
You can read the whole letter here. It’s worth a click. And this is just one more reminder that, while you may love your favorite sport, your favorite sport doesn’t love you back.
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— Pat Garofalo