The New Corporate Welfare

This is somewhat disconcerting:

The report from Good Jobs First, a nonprofit taxpayer watchdog organization funded by Ford, Surdna and other major foundations, identifies 16 states that let companies divert some or all of the state income taxes deducted from workers’ paychecks. None of the states requires notifying the workers, whose withholdings are treated as taxes they paid.

General Electric, Goldman Sachs, Procter & Gamble, Chrysler, Ford, General Motors and AMC Theatres enjoy deals to keep state taxes deducted from their workers’ paychecks, the report shows. Foreign companies also enjoy such arrangements, including Electrolux, Nissan, Toyota and a host of Canadian, Japanese and European banks, Good Jobs First says.

Why do state governments do this? Public records show that large companies often pay little or no state income tax in states where they have large operations, as this column has documented. Some companies get discounts on property, sales and other taxes. So how to provide even more subsidies without writing a check? Simple. Let corporations keep the state income taxes deducted from their workers’ paychecks for up to 25 years.

Good Jobs First, I should point out, seems to be interested in a slight variation on corporate welfare, declaring that they want corporate subsidies to be “accountable and effective”. I agree with the first, but the second is incredibly dubious. I don’t think that any of this corporate welfare business is effective in building economies. In the end, the state expends more money and effort scratching the backs of fat cats than they can possibly recoup. Unprofitable business are propped up at the expense of ones that can survive on their own. A better idea would be to simply make your state a good place to do business in general: keep taxes low, regulations reasonable and your budget balanced.

Of course, then the halls of our state houses wouldn’t be filled with rich guys begging favor of and giving contributions to two-bit politicians. So, we can’t have that.

Still, this confiscation of income taxes is a step past the usual corporate welfare. Money is fungible, and maybe there’s no difference between keeping your employees’ witholding and turning it over to the state before getting it back in a subsidy. But it reeks even more than usual.

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  1. Mississippi Yankee

    They listed Nissan in Mississippi… how much ya wanna bet Toyota gets the same deal when their plant opens in Tupelo?

    It’s all about getting those folks off the welfare rolls.

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