The Finance Curse. Nicholas Shaxson

Чтение книги онлайн.

СКАЧАТЬ that comes along that there is going to be some financing,” Schreck said. “There are other states that blatantly pay you—we aren’t close to that point.” Yet the race seems to be speeding up, and different tax jurisdictions are increasingly at each other’s throats. “We’ve traditionally been great partners, but it’s put us at odds with each other. Put a bunch of rats in a box and if there’s plenty of cheese, no problem. But take away the cheese, and they start biting each other.”

      Just a few miles east of Schreck’s offices, immediately across the state line, is Jackson County, Missouri, where I met Bruce Eddy, executive director of the Community Mental Health Fund. This is a public sub-fund that channels a little over $10 million per year into charities serving some fifteen thousand victims of domestic and sexual violence and people with mental health needs.²⁵ Most of its revenues come from a single stream, local property taxes. This is different from most tax systems around the world, where various taxes flow into the maw of a general public budget, then get mixed up and spat out in different spending allocations, so you can’t see the direct effects of any given tax cut. But here property taxes railroad straight through to particular spending lines, such as this fund. So competitive tax abatements have direct victims.

      Eddy’s work is intensely political, and he reports to elected officials, so he was guarded talking to me, but it was soon clear how badly the property tax abatements slice into his budget. “It’s like a hydra,” he said. “There are many tax abatements, and I have to fight for revenue to serve mentally ill people. This is not a sport.” “Competitive” tax cutting has become like a mania. “There’s a circular discussion going on here. Cutting taxes is good. Why? Because it’s ‘competitive.’ Why is ‘competitive’ good? Because it means lower taxes! That plays into the neoliberal agenda that doesn’t like the common good. The notion of being a human that merits some reasonable standard has been totally dismantled. And it’s getting worse.”

      This game has spread across the United States and the world. One of the bleakest recent tales concerns Amazon, which in 2017 announced plans to build a second headquarters, dubbed HQ2, and asked cities to submit secret bids stuffed with incentive packages. Amazon knew where it wanted to set up all along—somewhere that offered deep pools of educated workers and executive expertise and maximum access to political power.

      Yet it deliberately kicked off a ferocious beehive of bidding, as 238 cities scrambled to offer ever-bigger packages. Much of the bidding was shrouded in secrecy to maximize the anxiety, but of the details that emerged we know that Newark, New Jersey, offered a $7 billion package, and Chicago offered to let Amazon receive up to 100 percent of all income taxes paid by its employees. St. Louis, Missouri, offered $7.3 billion, and Montgomery County, Maryland, offered $8.5 billion for the $5 billion project. (Jamie Dimon, the CEO of JPMorgan Chase, said he would watch to see who won the bidding, then call up their lawmakers and demand the same.) In the end, though, Amazon didn’t go with any of the high-bidding places. In November 2018 it announced that it had split the bid between Long Island City in Queens, New York, and Crystal City in Arlington, Virginia, just seven minutes’ drive from the Pentagon, probably its most profitable client, and fifteen minutes from the White House. The combined bid came to a measurable $4.6 billion in subsidies to Amazon, plus a range of unmeasurable or hidden costs, including a potentially very large tax break for high net worth individuals with long-term investments in Amazon stock—people like Amazon’s CEO, Jeff Bezos. (Amazon’s three headquarters will also be an average of just 6.4 miles from Bezos’s three main residences.) “Just as Amazon has crawlers and algorithms to find the lowest price on any brand, they have created an offline algorithm pitting cities against each other,” said Amazon expert Professor Scott Galloway of the NYU Stern School of Business, ahead of the awards. “Amazon already knows where they want to be, and they are creating this kind of Hunger Games environment to mature the best term sheet possible—then give it to the city’s mayor where they want to be.”²⁶

      The Amazon example highlights two more crucial points about the race to the bottom that happens when states “compete” by offering tax cuts, deregulation, and subsidies to mobile businesses. First, the race does not stop at zero. Once corporate tax payments are down to nothing, it keeps going: you start getting into grants, peeled-off sales and payroll taxes, and other financial chicanery—an ever-growing pile of wealth extracted from taxpayers and handed to ever-larger corporations. There is literally no limit to the extent to which corporate players and the wealthy wish to free-ride off the taxes paid by the rest of us. Cut their taxes, give them subsidies, appease them, and they will demand more, like the playground bully. Why wouldn’t they?

      A second point is the winner’s curse, an idea well understood by economists. This is a common phenomenon in auctions, where the winning bidder is often the one who overpays substantially, because he doesn’t understand the value of what he is bidding for or what he is giving away; because he’s cajoled, bullied, or bribed into overpaying; or because he wants to be seen as catching the big fish—and he doesn’t care about the cost because he’s using other people’s money. A detailed 2016 study found that the pursuit of corporate megadeals (such as Amazon’s HQ2)—known as “buffalo hunting” in economic development circles—was costing US states an average of $658,000 per job directly created: a massive overall loss for these states. For technology data centers, the average cost was $2 million per job. When President Trump in July 2018 broke ground on a new manufacturing plant for Foxconn, the company claimed it would create between 3,000 and 13,000 jobs, which generated a range of positive headlines in Wisconsin. Yet the subsidy package was worth an estimated $4.8 billion—up to $1.6 million per job. And Foxconn has a long history of backing out of promised investments like this and of replacing workers with robots—what the company itself calls “Foxbots.” The cost per job could be higher still. By contrast, US states spent less than $600 per worker on training schemes, which are known to be vastly more effective than tax incentives in creating jobs.²⁷

      This chapter poses three big questions for policy makers. The first is: Will tax cuts and other goodies attract out-of-town business investment to my area? The answer is pretty clear and obvious: yes, sometimes. Since Oates’s 1969 paper came out, this question has been measured and confirmed over and again.²⁸ It doesn’t just happen with US states; it happens with whole countries too.

      The second question is: When states or countries “compete” to attract businesses or citizens, is this efficiency good for the world at large, or is it a harmful race to the bottom among the participating states?²⁹ As I’ve explained, the neoliberals used Tiebout’s big idea combined with ivory-tower Chicago School mathematics to argue that such “competition” is healthy and efficient. And if you’re a nerd like me who looks for this argument, you’ll find it all over. For example, in 2013 Switzerland’s president, Ueli Maurer, told the World Economic Forum at Davos, “Locational competition exists within our own borders. Diversity stimulates competition: that is not only the case in business, but also in politics. This leads to good infrastructure, to restraint in creating red tape and to low taxes.” This idea can be boiled down to an appealing sound bite: competition is good; if it works for companies, then it works for countries. Tiebout, Oates, and the Chicago School lent academic credibility to the idea that states and countries can compete as if they were businesses, generating prosperity. This idea has been massively, world-changingly influential.

      But there is one small snag with Tiebout’s argument: it’s hogwash. Utter nonsense. Even Tiebout said his model was unrealistic. Indeed, people who were at the seminar where Tiebout first presented his theory to the academic community said he offered it as an inside joke on the conservative economics establishment. He certainly found it delicious to have his paper accepted by the right-wing Journal of Political Economy. Tiebout reportedly said, “I don’t think those fuckers know I’m a liberal and they’ll feel compelled to publish it!”³⁰

      And the paper itself is clear about its limits. “Those who are tempted to compare this model with the competitive private model,” wrote Tiebout “may be disappointed.”³¹ It turns out that СКАЧАТЬ