So Donald Trump managed to convince Carrier to keep 1,000 jobs in the US. Apparently this was partly based on a threat that the corporation that owned Carrier - a big defense contractor - would lose contracts if they went through with it. But in part it was also due to special tax breaks worth about $7M.
There’s been a bit of pushback based on the notion that this rewards “bad” intentions, and I agree that this is a concern. But what’s even a bigger issue is the general notion of granting special exemptions to big players that ordinary people/companies don’t get.
Unfortunately this seems to be pretty much SOP when states and municipalities are trying to lure big businesses (or sports teams) to their area. It should be illegal IMO.
Yeah I wonder if it this is a long term play on the part of these corporations. If all they need to do to get tax breaks is claim they want to move jobs elsewhere, that is a huge potential for abuse. Who knows if Carrier actually would have gone to Mexico? It could have been a bluff.
I need a primer on when picking winners and losers is a good thing vs a bad thing, because there doesn’t seem to be a consistent view of this. This Carrier thing sure seems like the government getting involved in the free market and picking a winner, which I thought was a bad thing. But, now, for some unidentified reason, it’s a good thing.
This movement of appeasing companies to not outsource leaves a bad taste in my mouth. Like the OP said, it stinks of the same SOP of sports team owners making the public pay for stadiums while they reap all the benefits.
It would be much easier IMHO to threaten a US embargo on outsourced products. Would Carrier still move manufacturing facilities to Mexico if they were told they’d never sell another unit in the US again?
Even worse, it appears that Indiana had previously offered about $1.7M in tax incentives, which Carrier had accepted, then had to pay back when they decided to move anyway. So really, what the President-elect of the United States did was to strong arm Indiana (who’s current governor happens to be his V-P-elect) into quadrupling the incentives offered.
AND, of course, it’s still only keeping about 43% of the jobs there (the $1.7 was for the whole kit and kaboodle). So apparently it’s ok now in the Republican playbook for the feds to strongarm states into giving away tax cash to make the President look good.
Government can’t pick winners and losers, but this isn’t the government, it’s Trump displaying his genius business acumen. Remember, we know he has a good brain because he told us. Of course, things were different when Obama and his socialist friends bailed out the auto industry against the wishes of the Republicans. But you can see how effective that was. Those regions were so grateful they rewarded the Dems with their votes and punished the Republicans. Because the election was about economic anxiety.
An embargo based on country of origin would be contrary to NAFTA and the WTO treaties, so the US would either have to get out of both those agreements or be prepared to face the trade complaints and likely remedies against it under those treaties.
I think that the whole tax break so the business will show up in state A versus state B puts an unfair advantage across the whole of the US.
When I was living in Texas, they gave Exxon a huge tax break to relocate to Spring. The construction was great, but they largely brought in the people that worked there from other places from what the news reported. I guess they are spending their paychecks locally, which is a bonus, but what happens after 10 years? I used to do commercial life safety systems when this was going down and I spoke with someone that was doing work there. They told me that the were likely to relocate after 10 years to South Dakota from what they were telling him (he was a sprinkler guy doing the fire sprinklers at the new construction there.)
It seems to me that these places that get the tax breaks are somewhat economically disadvantaged anyway, so its not like the tax breaks are really helping getting the tax burden off of the locals that live there since the new infrastructure is going to need to be maintained by the municipality…
But I’m not an economist and I’m frequently not the smartest guy in the room, so I dunno. My average guy math doesn’t seem to add up though.
GM and Ford were not going to negotiate some chapter 11 bankruptcy and remain in business. They were going to shut their doors. The other auto manufacturers didn’t have the ability to take over their operations so a lot of parts manufacturers in the supply chain were going to go broke and that would have cascaded throughout the entire US auto industry and pretty much crippled it for a generation.
Companies like Toyota and Hyundai supported the bailout of their competitor because the auto industry infrastructure would have collapsed without those competitors.
