Is Squeezing Taxpayers an Inalienable Right?

A Too Much review of
The Great American Jobs Scam:
Corporate Tax Dodging and the Myth of Job Creation
By Greg LeRoy
Berrett-Koehler Publishers, 2005.

August 8, 2005

Politicians, particularly those of the rabidly “pro-business” persuasion, never seem to tire of orating over the relative merits of the “private” versus “public” sector, one economic world accountable to the market, the other — according to the contemporary conservative conventional wisdom — accountable to no one.

In fact, we have in the United States today just one economic world, not two. Our private and public sectors exist as separate, self-contained entities only in textbooks. In real life, the private and public sectors have always been intertwined, thoroughly and ceaselessly, one with the other.

Much of this ongoing interaction involves absolutely legitimate and indispensable cooperation. A city contracts with a private paving company to build a new road. No big deal. Everyone benefits. Tax dollars go to a private concern that, in exchange, produces a demonstrable public good. A clearly worthwhile interaction.

But since the 1970s, veteran corporate watchdog Greg LeRoy argues, our interactions between public and private sectors have become increasingly perverse. America's largest corporations are now reeling in tax dollars — by the billions — not to produce public goods but to pursue their own purely private business interests.

LeRoy calls this perversity the “great American job scam,” and this evocative turn of phrase just happens to be the title of his eye-opening new book.

Corporate America, author LeRoy helps us understand, is creaming off our public treasuries over $50 billion a year worth of loan guarantees, property tax abatements, sales tax exemptions, income tax credits, and outright grants of free cash and real estate.

All these billions, corporate executives and their friends in elected officialdom assure us, give private companies the “economic development” incenitives they need to create badly needed jobs.

All these billions, LeRoy counters, amount to “pure and simple transfers of wealth to corporate shareholders — from the rest of us.”

Ladling incentives on corporations, as LeRoy illustrates with one outrageous example after another, hardly ever generates good jobs. These incentives merely reward businesses for making business decisions they would reach anyway — or force state and local governments into insane competitions that can end up costing the “winner” a half-million tax dollars or more for each job that gets created.

Author LeRoy tells this story with a good bit of public policy panache. The last thing America needs, he notes, may be more retail space. The United States already boasts upwards of 20 times more square feet of shopping space than nations elsewhere in the industrial world — and over four times more space to shop than Americans had back in 1977.

Yet our local and state governments are actually spending tax dollars to help Wal-Mart and other big-box retailers pave over more paradise. About a third of Wal-Mart's retail stores — and 90 percent of Wal-Mart's distribution centers — have gone up with tax dollar subsidies.

And did we mention that five of the world's 14 richest people owe their fortunes to the Wal-Mart empire?

So what's to be done? The Great American Job Scam advances a host of common-sense steps that outraged taxpayers can take, everything from insisting on full disclosure in any economic development effort to demanding that companies, before they can receive cent one of public money, must sit down and negotiate “community benefit agreements” with local neighborhood stakeholders.

These benefit agreements, a relatively new innovation, typically commit the companies involved to pay a living wage and make space in their new development project for child care and other community priorities.

Steps like these will certainly slow the hemorrhaging of our tax dollars. But the executives who lead America's biggest corporations have shown a remarkable ability to carve out new tax loopholes — and win lawmaker approval for new grants and subsidies — as existing giveaways get exposed and eliminated.

This shouldn't surprise us. These executives, after all, have an intense incentive to keep tax-dollar giveaways flowing. The more tax dollars they can expropriate from state and local government treasuries, the bigger their corporate — and personal — bottom line.

And therein lies the irony implicit in The Great American Job Scam. Incentives do matter, but not in the sense that corporations proclaim. Giving businesses tax dollars to create jobs, as Greg LeRoy so deftly shows, almost always creates only problems — less revenue for schools, higher taxes on working families, environmentally dangerous sprawl in our dwindling open spaces.

The incentives that matter, meanwhile, sit in the employment contracts of our top corporate executives. These execs can walk off with tens of millions of dollars if they successfully “maximize shareholder value.” These tens of millions give executives an incredibly powerful incentive to do whatever it takes to juice share prices. And that whatever-it-takes includes squeezing states and localities for every subsidy and tax break imaginable.

That squeeze won't end so long as executives have an incentive to keep squeezing.

To end the “Great American Job Scam,” we just may need to limit that incentive. In 1997, unions and public interest groups in Connecticut tried to go down that limiting road. They had introduced in the state legislature a bill that would have denied all state contracts, tax breaks, and subsidies to corporations that pay their executives over 25 times what their workers receive.

A half-century ago, nearly every company in Connecticut could have met that 25-to-1 standard. But over recent years, fueled by a staggering increase in executive incentives, the differential between executive and worker pay has soared, in Connecticut and all across the United States. Executives now routinely take home 300 and 500 times more than their workers.

The 1997 Connecticut attempt to limit that differential would, in the end, fall short. That bill's time clearly had not come. Greg LeRoy's Great American Job Scam gives us ample “incentive” to speed up the clock, in Connecticut and everywhere else.

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For more information on The Great American Job Scam — and the battle to end corporate tax dodging — click to Good Jobs First.