It’s a new year and the economy can’t improve soon enough for cash-strapped cities, counties, and states across the country. With receipts from income taxes falling due to high unemployment, property tax dollars declining thanks to shrinking home values, and sales tax revenue flat despite increasing rates in many areas, state and local governments are searching hard for money to pay their bills.
When times were better, corporations shrewdly pitted cities and states against one another in a search for the best tax breaks. Local government was willing to give these large employers a break on some of their tax burden and help out with needed infrastructure in order to draw these companies and the employment they promised to provide to local communities. It was a win-win situation for both as companies had a willing partner in local government while politicians pointed with pride to the jobs they brought home to their districts.
Eventually the good times had to come to an end, however, and both employers and government struggle with trying to make ends meet. Yet those employers who took advantage of tax breaks to improve their bottom line have found difficulty meeting the numerical employee targets set by their agreements with local entities. Adding to their problem is having more and more local and state governing bodies use the “clawback” provision in their contracts with these corporations to cancel the tax breaks they gave away to attract the company in the first place.
Obviously a deal is a deal and local politicians rarely let the chance to add money to their coffers slip by, but perhaps in this case they are being a little hasty.
There are two categories of employers who have taken advantage of sweetheart deals with government to settle into a community. Some have never lived up to the employment promises made in their contracts for an assortment of reasons, but most were maintaining their employment numbers until economic conditions forced their hand, resulting in layoffs. Those companies are the ones who government should work with in order to find a suitable compromise measure instead of exacting a full penalty to a struggling company.
While economic conditions are difficult here, there are still hundreds of entities competing for large employers domestically, not to mention the siren song attraction of other nations who can woo manufacturers with the promises of cheaper labor costs and fewer regulations.
Certainly some companies who have never kept their word on employment numbers and feel pressured by local government to comply with their contracts to the letter may opt to bolt for greener pastures, but eventually that reputation will catch up to them and local politicians may be gunshy about believing the promises these scofflaws make. The ones who made the effort but decide to pull the plug because local authorities won’t work with them to find a sound middle ground for the time being would be the ones missed the most when they’re gone.
Unlike the popular perception created by Hollywood and the media, most employers attempt to be good citizens and improve the local cities, counties, and school districts in which they’re located. They give of their time through encouraging employee volunteerism and their money via charitable efforts as they strive to improve the places they call home. Shaking them down for a few dollars more may help the government’s bottom line, but that funding could come at some much larger expense if relationships become strained over a temporary setback.
Michael Swartz is a Liberty Features Syndicated writer.
Another in my continuing LFS series, this cleared back on January 6th.
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