It's time to consider some new national rules for handing out tax abatements and other economic development incentives.
Why? Because establishing fairer guidelines can stop the out-of-control way abatements are handled today.
Bringing sanity to the process can help maximize the value of abatements. More important, they might be reformulated to do something useful: to encourage manufacturers not to move work for the wrong reasons.
Tax abatements and other economic incentives have become so commonplace today that they seldom generate any controversy. Say a company plans to expand its existing plant. Sure, here's a tax break, the city council says.
The decision is almost automatic. The same is true for companies looking to relocate or build new factories: Bring the jobs and we'll take care of the infrastructure, training, and property taxes for the next decade, is the reply of most states and municipalities.
Do an Internet search on the term “tax abatement” and you'll come up with thousands of hits, many from economic development authorities touting their goodies to all comers.
Abatements have become entrenched because everyone is afraid to turn off the spigot. In fact, some states and municipalities say they need to offer abatements simply to level the playing field with others that beat them to the punch.
That's understandable, but it's still crazy.
It just does not make sense that the United States — touted as a leader in the push for free trade and a global beacon of the institution of capitalism — has so thoroughly institutionalized the concept of businesses not paying their fair share of local taxes.
Think for a minute about the biggest problems that processors and mold makers complain about today. Is it high local taxes? No.
We've been polling processors for years, and they've been pretty consistent in citing a single, simple factor as the most important to their own success: the success of their customers.
If that's true, then you'd think the most important issue companies would consider related to choosing a manufacturing site would be proximity to customers.
You can't blame processors for trying to maximize their competitiveness by seeking all of the tax breaks available to them.
But the public needs to realize that abatements today are overused.