Last year around this time, Mississippi announced that it would be giving Japanese tire manufacturer Yokohama Tire Corporation an estimated $135 million in state and local incentives to build a plant in West Point.
At the time, we wrote that one of the problems with such corporate giveaways is that they create a demand for more of them.
Sure enough, one of Yokohama’s direct competitors, Cooper Tire, has its hand out for $38 million in local and state aid to pay for upgrading its Tupelo plant.
In return, Cooper promises to retain at least 1,300 workers at the plant for the next decade — which is actually 300 less than the company now employs.
So, apparently, this is the new bargaining chip that manufacturers are holding over the state’s head. Instead of promising to add jobs, which was the traditional way that such incentives were rationalized in the past, it’s now, “Give us the money if you want to keep the jobs you already have.”
We can’t blame Cooper for asking for the help.
The state, with its sweetheart deal for Yokohama, has created an unfair business advantage for one of Cooper’s direct competitors. For every dollar that Yokohama puts up to build the plant in West Point, taxpayers in the state will be forking out about 45 cents. Such subsidies will make it easier for Yokohama to undercut Cooper and other competitors on price. And it will allow Yokohama to pay more for its labor, giving it an advantage in hiring not just over other tire companies but any other business in the area.
Mississippi, by investing heavily in Yokohama, has given it a leg up in the marketplace. Cooper is asking the state and Lee County to help level the playing field a little.
Once the state gets into the business of picking winners and losers in private enterprise, there is no stopping it. Sooner or later every business of any size starts putting its hand out.
As some have said, using public financing to attract industry to this state is nothing new. It goes back at least as far as Gov. Hugh White’s “Balance Agriculture With Industry” program of the 1930s.
But Mississippi — and most other states — keep adding new layers and new rationales for these incentives. Retailing, for example, used to never qualify for public financing because it generally just cannibalizes revenue, moving it from one store or set of stores to another. Now the state is on the hook for some $155 million in tax breaks for three shopping malls under the guise that they are “cultural attractions” — and penalizing all the merchants who have or will have to compete for customers with these heavily subsidized operations.
These public-private partnerships are out of control. If all states would agree to stop them, the nation, the taxpayers and the economy would be a whole lot better off.
Emmerich, Wyatt. Northside Sun. Editorial. March 11, 2014.