Like an alcoholic unable to resist a full gleaming bottle of Jack Daniels or a sex addict unable to resist the lure of a porn site, the Mississippi political establishment has given another quarter billion dollars to another big company to build a manufacturing plant.
They stayed on the wagon for a good six years, far longer than any prior period of crony capitalism abstinence. But the lure of the big announcement about the big plant using other peoples’ money proved too hard to resist. They gave in.
The state gave $263 million in incentives to Continental Tire in 2016 for a $1.4 billion investment promising 2,500 jobs. This go-round, an unnamed aluminum plant will get $247 million for 1,000 jobs. That’s a cost of $247,000 a job.
As usual, this was all rushed through in secrecy. A one-day special session was held and the proposal was passed with only a handful of dissenting votes. Madison representative Joel Bomgar was one of those. He deserves a medal for political bravery.
Like a broken record, this happens again and again. And like a broken record, I will write yet another column about why this is terrible public policy.
Our governor, Tate Reeves, the chief promoter of the plan, knows it’s terrible public policy. He says it in nearly every speech he gives, something like: “Government’s role is not to pick winners and losers but to get out of the way and let the free market work unencumbered by governmental interference.” I’ve heard him say that line a dozen times.
But just like an alcoholic who knows his behavior is bad and destructive, Reeves et al just couldn’t help themselves. It was just too hard to resist.
All that limelight. The big press conferences. The excitement. The money. The high-powered meetings. The public adulation. The reservoir of campaign contributions. It was just too . . . hard . . . to . . . resist!
Even Lieutenant Governor Delbert Hosemann succumbed. Like Reeves, he knows better. In fact, Hosemann has proposed a fair and equitable economic development plan that would give incentives equally and fairly to all companies that create new jobs. But the lure of landing the big one overpowered his senses, like the perfume of a harlot overcomes an inebriated married man late at night in a bar on a business trip.
There is no evidence anywhere that company-specific tax breaks for mega-plants are good for the long-term health of a state. In fact, the studies show the opposite. The more a state plays favorites subsidizing mega-plants, the slower the state’s job growth over the long term. The European Union doesn’t allow these deals. The United States should do the same.
The non-profit Tax Foundation sums it up nicely:
“States that make the mistake of relying too heavily on incentives will find that this makes it more difficult to maintain competitive tax burdens on established operations. Even worse, some of the investment decisions businesses make in response to the availability of those incentives will be less economically efficient than the ones they would have made in their absence, with businesses adjusting their economic decision-making to take advantage of tax incentives even when, absent that incentive, they would make a different choice.
“Policymakers that resist the pressure to create or expand targeted carveouts in the tax code—and ultimately work to phase out these carveouts over time—will find they have more revenue flexibility to create a tax system that treats all businesses favorably, regardless of industry or how long they have been in operation, and without distorting the economic decision-making of those firms. States that maintain a competitive underlying tax code will then find they can attract business investment and experience strong long-term economic growth without picking winners and losers and without cluttering their tax code with complex carveouts, a goal all states should work to achieve.”
Simple common sense should expose the negative effects of these company-specific tax breaks. How is it fair to give one company huge subsidies and tax breaks while all the other companies have to pay taxes and build their own plants?
These deals make one company very happy, but they send a horrible message to every other company: The Mississippi government does not play fair. It’s not what you know, it’s who you know. Crony capitalism reigns in Mississippi.
Every manager in Mississippi will tell you that their greatest challenge is hiring good people. If the government gives huge incentives to one company, they are able to hire the best workers away from existing companies, causing the unsubsidized companies to suffer and decline. The state of Mississippi is just robbing Peter to pay Paul.
Mississippi has thousands of small, mid-size and large employers. They all have to compete, hire employees, raise capital, build facilities and make a profit. How is it fair to reward just a handful of politically connected companies with huge tax breaks? The other companies have to make up the difference.
I have read the contracts with these companies. In some cases, the state pays for the private jet transportation of its corporate executives. Typically, if the company does not fulfill its promises, there are minimal consequences. If Mississippi voters really knew how these deals go down, they would be outraged.
To be sure, voters are part of the problem. They get excited by big deals just like the politicians. But in a democratic republic, the elected leaders are supposed to exercise prudence, fairness and judgement. Instead, our leaders get swept away just like the public.
And for Pete’s sake, why are these deals rushed through in secrecy? There is absolutely no defense of that.
Meanwhile, our Republican leadership has turned down $7 billion in federal Medicaid funding on the grounds that it’s “socialized medicine.”
Apparently, Reeves thinks it’s perfectly fine to give government money to steel plants while turning down federal money that would keep our rural hospitals open and provide health coverage for the working poor. Go figure that one out.
Wyatt Emmerich is the publisher of the Northside Sun and the president of Emmerich Newspapers, which consists of papers in McComb, Greenville and Greenwood.