Effingham Daily News, Effingham, IL

Community News Network

December 26, 2013

States should rethink big tax breaks to companies, economists say

(Continued)

Boeing has upped the stakes. According to a company document obtained and reported by the St. Louis Post-Dispatch, Boeing is asking states to foot most or all of the bill for a new facility that could cost $10 billion, and for tax breaks and training for its workers. Suitors are already opening their wallets.

Missouri lawmakers this month approved a nearly $2 billion package. Washington state, where the aerospace giant has substantial operations, approved incentives approaching an estimated $9 billion earlier this year. Other states, such as South Carolina and Texas, are hoping to win the plant but are keeping their bids close to the vest.

Zidar and Serrato challenge that strategy, starting by reevaluating just how mobile firms are. Their results are partly intuitive — if all that mattered to company location was tax rates, they reason, tech firms wouldn't cluster in high-tax California. Other factors, including housing costs, labor costs and the ready supply of workers with the skills the company needs, contribute to how productive a company is in a particular location. Often those other factors overwhelm modest differences in tax rates.

States can influence all of those factors, not just taxes, and often they can improve those areas for a lower cost than the tax breaks. That's the second half of the economists' conclusion, as it applies to Boeing: Maybe the bidders should be thinking about how to improve infrastructure or labor supply, or whatever their advantage is over other states.

"If I were the governor" of a state with a major Boeing presence, Zidar said, "I would try to figure out how much cost savings Boeing would enjoy by being in Washington versus their next-best option — in terms of productivity, transportation costs, start-up costs to roll out a brand-new major plant and tax savings, etc. — and bid based on that."

He also said the state shouldn't bid beyond a "reasonable cost" per job. But that's the rub. The underwhelming recovery has made many states desperate for economic activity and has redefined "reasonable cost" upward.

Text Only
Community News Network
  • sleepchart.jpg America’s sleep-deprived cities

    Americans might run on sleep, but those living in the country's largest cities don't appear to run on much.

    August 20, 2014 1 Photo

  • Who should pay for your kids ACT?

    Thirteen states paid for 11th-grade students in all public high schools to take the ACT college admission test this year, with several more planning to join them in 2015.

    August 20, 2014

  • Pets.jpg Why do people look like their pets?

    As much as we might quibble over the virtues and vices of Canis domesticus, however, and over whether human nature is any better or worse than dog nature, even dog fanciers don't usually want to look like a dog.

    August 20, 2014 1 Photo

  • Ice bucket challenge trending up

    Internet trends are a dime a dozen these days. Everything from Tebowing to planking to the cinnamon challenge can cause a wave of social media activity that can last for weeks before fizzling out.

    August 19, 2014

  • Africa goes medieval in its fight against Ebola

    As the Ebola epidemic claims new victims at an ever-increasing rate, African governments in Sierra Leone, Guinea and Liberia have instituted a "cordon sanitaire," deploying troops to forcibly isolate the inhabitants in an area containing most of the cases.

    August 18, 2014

  • Democrat? Republican? There's an app for that

    If you're a Republican, you might want to think twice before buying Lipton Iced Tea, and forget about Starbucks coffee. If you're a Democrat, put down that Reese's Peanut Butter Cup, and throw away the cylinder of Quaker Oats in your pantry.

    August 18, 2014

  • Five myths about presidential vacations

    In the nuclear age, presidents may have only minutes to make a decision that could affect the entire world. They don't so much leave the White House as they take a miniature version of it with them wherever they go.

    August 15, 2014

  • Can 6 seconds launch a career? A generation of Vine stars sure hopes so.

    A year ago, Shawn Mendes filmed himself singing a tentative acoustic cover of the Justin Bieber song "As Long as You Love Me" and put the results on Vine. He wasn't expecting much response. "I didn't really want anything to happen; I just kind of wanted to see what people would think," says Mendes, 16. "I posted that first Vine and woke up the next morning with 10,000 followers. That was pretty cool."

    August 14, 2014

  • Freshman.jpg 8 crucial tips for college freshmen

    With school starting back up around the country, no one has a bigger deer-in-the-headlights look than college freshmen.

    August 14, 2014 1 Photo

  • A night in Ferguson

    For the past week in Ferguson, reporters have been using the McDonald's a few blocks from the scene of Michael Brown's shooting as a staging area. Demonstrations have blown up each night nearby.

    August 14, 2014

AP Video
Parade
Magazine

Click HERE to read all your Parade favorites including Hollywood Wire, Celebrity interviews and photo galleries, Food recipes and cooking tips, Games and lots more.