While attending a conference recently, a couple of friends from Louisiana gave me some friendly grief, telling me how they are "kicking some Yankee butt," or some such.
Amused, I inquired, "What are you talking about?"
They then proceeded to remind me how a few months ago, Gardner Denver Inc. decided to move 230 manufacturing jobs out of Sheboygan to Monroe, La.
This decision prompted Louisiana Gov. Bobby Jindal, who is believed to be one of the frontrunners for the Republican Party presidential nomination in 2012, to say, "Today's announcement follows a recent trend - since early 2008, leading companies have announced moves of their headquarters or other significant operations to Louisiana from states, such as California, Georgia, Mississippi, Rhode Island, Virginia and Wisconsin. We expect to see even more of these moves in the future as national executives become increasingly aware of Louisiana's recent progress with ethics reform, tax competitiveness and workforce development."
That's a great campaign sound byte (aside from the "progress with ethics reform" part), but let's look a little closer at this Baton Rouge two-step.
To convince Gardner Denver to leave Wisconsin for Dixie, the State of Louisiana offered an incentive package, including a grant of up to $9 million for relocation expenses. The City of Monroe kicked in a 124,000-square-foot building expansion.
Let's do the math here. You divide $9 million by the 230 jobs, and Louisiana is paying more than $39,130 per job. By the way, the annual salary of the Gardner Denver jobs is estimated at $37,000.
Now remember, this is the same Bobby Jindal who refused to accept federal dollars to provide extended unemployment benefits to people who have lost their jobs in his state.
When I returned home from the conference, I was greeted by the news that MillerCoors LLC had officially opened its new corporate office in Chicago. The celebration was toasted by Democratic Chicago Mayor Richard M. Daley, who bragged about how MillerCoors had received more than $20 million in incentives from the State of Illinois and his city to locate its headquarters along Wacker Drive. MillerCoors plans to bring 375 jobs to the Windy City, leaving Milwaukee and Golden, Colo., out in the cold.
Again, let's do the math. You divide the $20 million by 375, and you get an Illinois price tag of $53,333 per job.
It's easy to understand how politicians, both left and right, love to pose for holy pictures after stealing away businesses from other states.
But this strategy of corporate welfare is a race to the bottom. Wisconsin would do well, not to focus its resources upon stealing away businesses from other states by giving away taxpayer dollars, but by doing everything it can to make sure the businesses that already are here can expand and hire more people.
A great first start would be to make more low-interest loans available for Wisconsin businesses to build new facilities or expand existing factories and offices, to buy more equipment or to hire more people. Many Wisconsin business owners tell me they simply cannot get financing from banks to expand their companies or launch new commercial real estate development.
If the private sector won't finance these projects, perhaps the state can, even by leveraging federal stimulus dollars.
Let's light this candle and get this economy rolling again! Daylight is burning!
Steve Jagler is executive editor of BizTimes Milwaukee.
7 Comments
How about CUTTING TAXES on the businesses that are providing the existing jobs?!?! I don't want to borrow more money - I want to be able to stay in business and pay back the money I currently owe. I don't blame those companies for leaving; higher labor cost, taxes and unfriendly business environment make it harder and harder to keep the few people I do, employed.
Steve, you may consider sticking to journalism. Your calculations assume one year of employment. Garnder Denver was in Wisconsin for decades! You also forget the corporate sponsorship of events that these corporate headquarts often support. Corporate sponsorship of the arts and performances in their communities and the state. Corporate donations and donation matching for charitable events and groups that would otherwise go unfunded. Also absent from your calculation are the taxes paid by the workers; payroll tax, property tax, automobile taxes (we call them fees in WI). Further missing is the ecomonic enhancement of these workers spending money for goods and services within the state generating sales taxes and money flow.
Nearly all families spend most of their income in the community where they work. So if the average is $37,000 in earnings per worker, and the majority of those earnings are spent in state, then the state's economic ROI is less than 2 years. Pretty good investment.
One more thought, many of these incentive programs do not cost taxpayors or the municipalities. There was no revenue previously that was 'lost'. The states will typical forego tax collection until the grant is paid. Therefore they had no money coming in without the business, now they will have money coming in from the business a few years down the road.
The short sighted thinking of the Wisconsin administration and Doyle is exactly why businesses are moving out as fast as their corporate structure and internal due diligence will allow. Workers as well are following the trend. At the rate Wisconsin is progressing all that will be left is government, businesses that rely on government and welfare recipients.
Now before someone decries me as a doom and gloomer, I love Wisconsin. If we don't recognize the problem, we have no chance of solving it. We truly need to get our representation back from special interests and lobbyists. We need to treat business owners with respect. We need to cap or reduce welfare programs. And we must curb and reduce our spending.
I believe it all starts with who we elect. Let's be sure we start electing people who serve us and will refuse special interest money.
You're going to fight an uphill battle on this one. That's because most business people in Wisconsin have been pre-conditioned by talk radio dorks to only think one way.
In fact, they want it both ways. Look at what Bob just said: "And we must curb and reduce our spending. I believe it all starts with who we elect. Let's be sure we start electing people who serve us and will refuse special interest money." OK, so then we shouldn't be throwing away $37,000 in taxpayer dollars to special interests to buy jobs for this state, right? But no, they want it both ways. They say they want to control spending, and they complain about spending, and then they want more spending for businesses. In fact, it is corporate welfare they seek.
When it comes to state spending, a buck is a buck. And shilling out free taxpayer bucks to companies is just as loathsome and deserves just as much scrutiny as anything else. But they don't look at it that way. They want a free ride, and when they get socked with the bill for that free ride, they complain.
If you really want to hold down spending, then you should be against throwing all this free money around. And in the end, do we really want to become more like Louisiana, one of the most corrupt state and uneducated states in the union?
The issue is not what other states are paying for these jobs, the issue is why the employers are even considering moving out of Wisconsin being that a lot of these employers have substantial investments in the state.
I find it astonishing that taxes are not mentioned in the editorial. As the editorial says- do the math. So what if you can save 2 percent on a subsidized business loan (if by chance your business needs one and qualifies for one), if your cumulative tax bill blows your company's budget and your personal budget.
Here are the hard facts:
-Income levels in Wisconsin are below the national average and are falling farther behind
-Tax levels are well-above the national average
-Wisconsin's socialist/progressive history leaves it with a subtle anti-business environment
-We have a governor, state assembly and state senate that are more concerned with payback to the teacher's union, trial lawyers, and Indian casino operators than with business in the state unless a company has an employee union that happens to support them.
-We have winters that last about five months, which gives us a disadvantage before you consider taxes and and the general anti-business environment.
Overall, Wisconsin's business environment sucks. If Wisconsin were a superior state to live in, to open a business, and/or to relocate a business we would have a history of strong population growth and strong employment growth - we don't.
Wisconsin, its counties, municipalities, school districts and other taxing authorities need to limit spending and taxes to the rate of inflation. We need to make it illegal for government employee unions to make campaign contributions to politicians that spend tax money on government employee union members. We need to stop creating unelected taxing authorities. We need to stop providing politicians and government employees with retirement benefits that well-exceed those available in the private sector. Until we start addressing these issues Wisconsin's decline will continue.
John, possibly I have this wrong, but follow my example and share your thoughts.
I believe they are not 'spending' taxpayer money. They are holding off on 'additional' business tax collection up to an agreed amount. Let's say LA receives $10 in 2009 for taxes. Gardner moves in 2010 but LA does not collect business tax from Gardner so LA receives $10 again in 2010. However LA also receives the taxes of the added employees for property tax, sales tax, etc. So 'all in' LA receives $10 plus $1 more from the new employees. When Gardner's grants, TIF's etc expire in say 2020 LA receives the corporate taxes from that point forward.
No tax payer money is 'spent' or lost but additional taxes are collected and another corporate sponsor for community events is added. And support businesses that meet the employee's needs spring up as well. I realize this is grossly simplified.
So to reply to your comments directly:
-tax payor money is not being spent
-secondary taxes are collected; this is an increase
-yes spending should be controlled (reference California)
-I don't want all businesses to get a free ride but a large business like Gardner is very sought after
-keep in mind the 10's of small and midsize businesses that spring up around a large business to serve the employees (carpenters, landscape, etc)
-Note that after the start up help Gardner will be on a level field with other businesses
-I complain about spending because government spending has increased dramatically faster than cost of goods/services. And yet services have gotten worse. Where is the money going?
-I would expect government to support healthy business climates with level playing fields
-quite honestly the recent budget is not a slap in the face to business; it is a don't let the door hit you on the way out.
Lastly, take a moment to think about your last 3 sentences. Assuming your are correct about LA faults and it is publicly accepted knowledge. How badly does Wisconsin come across that companies are willing to look beyond LA corruption and education issues to make such a move from Wisconsin?
I look forward to your thoughts and reply.
From what I can tell from the blog, Louisiana gave away millions in GRANTS, and so did Illinois. So, every company that threatens to leave any state just says, "I'm gonna leave unless you jump this high and give me this, because that's what the other state is going to give me."????? Where does that game end? That is corporate welfare. And taxpayer dollars are subsidizing the private sector. That is socialism. If you truly want lower taxes, you would be against this kind of crap!
John, your point is well taken. However on an order of magnitude we're discussing 9 mil with an ROI versus BILLIONS spent and we don't know where it is all going because our services are certainly getting poorer.