Corporate subsidy bidding wars

Although the bidding wars for the Amazon headquarters attracted great attention due to its sheer size, hundreds of smaller, secret subsidy auctions take place throughout the country every year. Incentives for such deals are embedded in the tax code in every state. Together, these sums have been estimated to cost state and local governments $45 billion to $70 billion annually. The costliest “megadeals”—mostly billion-dollar subsidy packages—cost an average of $658,000 per job. Mississippi has been among the top states in the nation measured by sweetheart subsidies per capita.

This is in sharp contrast to the European Union’s (EU) rules, which comprehensively limit bidding wars. First, the EU’s rules on all forms of state subsidies require advance notice to the European Commission. The commission then determines if the program or project distorts EU trade too much to be allowed to take effect. The commission has so much autonomous power that, if a deal is not disclosed in advance, a company can be forced to repay the aid, and the government can be fined if it repeatedly fails to follow the commission’s decision. This improves transparency prior to a deal being formally approved, whereas in most U.S. states and cities, advance disclosure is poor to nonexistent.

Here in the United States, Missouri and Kansas have entered a truce in industrial recruitment bidding wars. The two state have agreed to stop using tax breaks to lure investment and jobs from one another. The majority of company moves from 2011 to 2019 were between five and seven miles from the state line. In other words, corporations were just taking the two states for a ride to get the best deal.

This strikes at the heart of interstate commerce and is a legitimate area of Congressional concern and action. Taxes should be levied in a uniform manner. Special tax breaks for certain corporations are not only unfair, but can pave the way for government corruption and deplete local and state governements of revenue. It’s high time that Congress take action to limit these unproductive bidding wars between states to lure business.

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