Stealing Money From Kids
by Russell Mokhiber and Robert Weissman
Dissident Voice
January 29, 2003
If there's one
thing that brings together the right and the left, and citizens and
corporations, it is the importance of education -- for stimulating the
intellect, developing a moral sensibility, enhancing the civic culture,
enabling a skilled workforce and creating a sense of community.
The question is:
Who's willing to pay?
Not big
corporations.
They instead
demand cities and states offer tax breaks before they will invest in new plants
and facilities. Those tax breaks, frequently in the form of property tax
abatements or what is called tax increment financing (TIF, a long-term
diversion of certain areas' property taxes to corporations investing in those
areas), deprive schools of money.
Property tax
breaks often directly siphon money away from schools, which rely heavily on
property taxes as a revenue source. According to "Protecting Public Education
From Tax Giveaways to Corporations," a report issued last week by the
National Education Association (NEA), local property taxes constitute 65
percent of all local education funding, and 29 percent of all school funding,
including local, state and federal contributions.
Property tax
abatements and TIF districts cost schools hundreds of millions of dollars a
year, at least.
Case studies in
the NEA report, which was conducted by Good Jobs First, the leading
organization studying state and local business subsidies, show that abatements
and TIF districts cost schools in Texas $52 million a year. Montana schools
lose $16 million a year in revenues to business tax subsidies. Abatements and
TIF reduced or diverted property tax revenue for Ohio schools by $102 million
in 1999.
Poor reporting
rules and the diversity of jurisdictions and tax revenues make it almost
impossible to determine a total cost to schools from business tax breaks.
However, some
estimates have tagged the cost of local and state subsidies to business as high
as $50 billion annually. This is an estimate of the total cost, not just the
amount borne by schools, and some states reimburse schools, in whole or part,
for revenues foregone due to property tax breaks.
The NEA report
offers three recommendations to redress the problem highlighted by the study.
First, there should be improved disclosure of subsidies and enforcement of
conditions attached to subsidies. Second, local school boards should have a
formal say -- up to and including veto power -- over subsidy decisions. Third,
states should prohibit the abatement or diversion of the school portion of
property taxes.
This all seems
logical enough to us.
What the report
did not do was suggest what corporations' role should be in these matters.
Since corporations drive the "bidding for business" game, this is an
important question.
Since companies
so heavily emphasize the importance of a skilled workforce, shouldn't
corporations simply be willing not to ask for property tax abatements?
We decided to
call up the U.S. Chamber of Commerce and find out.
We asked Marty
Regalia, the Chamber's chief economist: In light of the impact on schools,
should companies stop seeking tax breaks from cities and states?
That proposal,
he said, is "blatantly un-American." (Yes, they really talk this way
at the Chamber.)
No one forces
cities and states to give tax breaks, he said. They are competing for a benefit
-- new investment -- and they choose to enter the competition. If they think it
is a bad deal, they are free not to offer tax breaks. "Local communities
do not give away [tax breaks] at gunpoint," he said.
There is some
truth to Regalia's point that cities and states are free to decline to offer
tax benefits.
The problem,
though, is not just that most government officials are spineless and/or
indentured to business, but that there is an inherent difference in bargaining
power between government and business. The companies have the power to decide
where to locate. And even though most threats to move factories or offices are
bluffs, in some cases, a tax break may influence a decision to locate in this
town or the one next door.
However,
property tax breaks and benefits virtually never determine whether or not a
company of any size is going to undertake a new investment.
In the bigger
picture, and based on the rules of the game, the outcome is always the same:
the cities and states collectively lose tax revenues, the investing company
always saves money that it would have been willing to pay in taxes on
investments it would have made anyway.
This all comes
at the expense of education, among other important government spending
priorities.
The tax breaks
are taking money from kids as sure as the schoolyard bully stealing classmates'
lunch money -- just on a scale so large that few have been willing to call it
by name.
Russell Mokhiber is editor of the Washington,
D.C.-based Corporate Crime Reporter. Robert Weissman is editor of the
Washington, D.C.-based Multinational Monitor. They are co-authors of Corporate Predators: The Hunt
for MegaProfits and the Attack on Democracy (Monroe, Maine: Common Courage
Press, 1999; http://www.corporatepredators.org).