Corporations' Cross-Country Extortion Racket

Published on
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the Providence Journal (Rhode Island)

Corporations' Cross-Country Extortion Racket

by
David Segal

BOEING EMPLOYEE John Pluegar said, "It's a beautiful sight."

"I love it," said a Boeing wing mechanic who asked not to be named, admiring the plane.

They and so many others are ooohhing and aaahhing about the new 787 Dreamliner passenger plane that Boeing recently unveiled. The 787 is scheduled to start carrying passengers next year, and orders for about 700 planes have already been placed. With moist air-conditioning, wireless Internet access, larger seats, and 20 percent greater fuel efficiency, Boeing's first all-new model in 12 years offers plenty to get worked up about. More then 15,000 people went to the coming-out party, with another 30,000 hooked in by satellite. According to PR Newswire, "In all, the 787 premiere potentially reached 100 million or more viewers, making it one of the largest corporate TV and Internet broadcasts in history."

Those are impressive numbers, worthy of the world's largest aerospace corporation. But the most impressive figure of all is 3.2 billion: that's how many dollars the people of Washington State conceded in tax breaks and grants to get Boeing to build the plane in the city of Everett.

It's one of the most egregious efforts by a corporation to play states off of one another for private profit.

In 2004, Boeing Company requested and received "bids" - really offers of hundreds of millions or billions of dollars in tax breaks and subsidies - from at least 21 states seeking to have the company build the Dreamliner assembly factory within their borders.

Washington was especially desperate, since Boeing had moved its corporate headquarters out-of-state, from Seattle to Chicago, in 2001.

Washington State with so much brand loyalty - but Boeing with no hometown pride!

Corporations have grown expert at forcing race-to-the-bottom competitions between states, reducing tax revenues by billions of dollars. States are all too willing to play along, spending millions of dollars of their own competing for new business, or trying to swipe existing businesses from one another, under the guise of "economic development."

It's a phenomenon that's hit home here too: Among other instances, in the late 1990s, the New England Patriots - emblem of regional unity - played Connecticut against Massachusetts, threatening to move from Foxboro to Hartford. Connecticut offered the Pats a $500 million stadium financing package, but the team ended up right back where it started - with the Massachusetts footing the bill for $70 million in "public" infrastructure improvements.

While in individual instances one state wins and another loses, in the aggregate we're all worse off, as net public good decreases with each such maneuver, and cash-strapped governments devote limited time and resources to stealing - not creating - jobs.

As states sprint to the bottom, the perpetrating corporations aren't disdained, aren't vilified by the jurisdictions giving up millions or billions of dollars to nab them: They're greeted as heroes at celebratory press conferences and ground-breakings, in editorials and campaign literature.

It's time for the states catch on - to work to change the logic of the dynamic, and stop celebrating these robber-barons.

There are at least a couple of potentially viable possibilities:

In 2000, taxpayers filed a lawsuit challenging $281 million in incentives offered by Toledo, Ohio, to DaimlerChrysler, on the grounds that such targeted incentives violate the Commerce Clause of the U.S. Constitution, which says that tax policy regulating commerce is the purview of the federal government. The money (and land that held 89 homes) was offered to persuade the company to expand locally - even while reducing the number of local jobs by 10-20 percent - rather than in Michigan. The U.S. Supreme Court eventually ruled against the plaintiffs on technical grounds - that they didn't have standing to have filed the suit. The issue remains unresolved.

(The legal team was initially prepared to fight the Patriots' move to Connecticut, had it moved forward.)

Alternatively, states could join together in an interstate compact to not use targeted tax incentives to steal jobs from one another. (States participating in the pact would still be able to use such incentives to draw in businesses from non-participating states.) Several state legislators through the Northeast have begun the conversation this year.

It'll be a struggle, but we'll all be better off if states start to stand in solidarity, and not be seduced to play pawns in a game that only benefits corporations.

David Segal, of Providence, is a Rhode Island state representative.

© 2007, Published by The Providence Journal Co.

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