Tax Breaks

State industrial policies don’t seem to be working

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Mississippi ranks number two in the nation in sweetheart deals to politically connected companies looking for big tax breaks. I would argue these two circumstances are not a coincidence.

Wyatt Emmerich | The Northside Sun | September 10, 2014

As of July 2014, Mississippi has the highest unemployment rate in the nation, 8 percent, followed by Georgia at 7.8 and Michigan and Rhode Island both at 7.7.

Alabama is 7.0. Louisiana is 5.4. Tennessee is 7.1 and Arkansas is 6.2. South Carolina, the state demographically most like Mississippi, is 5.7. Texas is 5.1.

Our political leaders love to talk about jobs. Gov. Phil Bryant loves to talk about how many “golden shovels” he has in his garage from groundbreaking ceremonies, but the reality is not good.

Mississippi ranks number two in the nation in sweetheart deals to politically connected companies looking for big tax breaks. I would argue these two circumstances are not a coincidence.

Most jobs in Mississippi are provided by small business. These small businesses are getting taxed more so the big businesses can get a sweetheart tax break. This creates a bad business environment that restricts growth.

I have written on this subject before, but it bears repeating in light of our state’s abysmal jobs situation.

Consider the Yokohama Tire plant as an example. Last year, Bryant and the Legislature gave this company $330 million in incentives, according to an analysis by the Associated Press.

The incentives are in the form of waived corporate, sales, franchise and property taxes. In addition, the state will give the company hundreds of millions in direct financing, guaranteed by the taxpayers.

In essence, Yokohama Tire is one massively subsidized state enterprise. Just like China!

As it stands, Yokohama plans to hire 500 employees in West Point next year. Yokohama promises to hire up to 2,000 in the future, but often these rosy employment promises never pan out.

Dividing the $330 million in Yokohama incentives by the 500 jobs comes to $660,000 a job. At that rate, the government could just invest the money and pay the 500 employees the interest. They would make the same amount of money and not even have to work!

Even if the 2,000 jobs materialize, you are still looking at $160,000 per job. You would be hard pressed to find a single company in Mississippi worth $160,000 per employee.

Mississippi has 1,266,300 people in its civilian workforce. The 500 Yokohama jobs expected next year represent one out of 2,500 jobs in our state – a tiny percentage.

Put another way, if Mississippi values each job in Mississippi at $160,000, then the 1,266,300 jobs in Mississippi are worth a total of $208 billion. That’s 2.4 times the entire annual GDP of our state.

Any way you crunch the numbers, the price per job for luring these big companies makes no sense. Ultimately, the other businesses and taxpayers of Mississippi must pick up the bill. It gets even worse when you think about this logically. Where do those 500 jobs come from? If they all come from out-of-state, then it really doesn’t benefit existing Mississippians at all.

If the jobs come from existing Mississippians, then there is no net increase in jobs. You are just moving jobs out of one pocket into another. The Yokohama jobs are coming from its Tupelo competitor, Cooper Tire.

Only if 100 percent of the Yokohama employees come from the ranks of the existing unemployed, could you even begin to make a case. Unfortunately, most of the chronically unemployed have low skill levels. These are not the people likely to be employed by Yokohama. Even then, the numbers don’t work.

In the end, Mississippi loses $330 million in tax revenue and gets nothing in return. This stifles growth.

To read more:  https://northsidesun.newspapers.com/image/134469968/?terms=State+industrial+policies+don%E2%80%99t+seem+to+be+working

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