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The Great American Jobs Scam: Corporate Tax Dodging and the Myth of Job Creation

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Across the country, state legislatures appropriate millions of taxpayer dollars each year on "corporate jobs incentives" under the guise of "economic development and job creation". Greg LeRoy manages to shed light on the fallacy of these programs, using real life examples to prove that "incentives" are simply corporate welfare schemes that do little more than pad the pockets of hugely profitable corporations - while providing photo ops for politicians.

As a longtime advocate for small business owners, who are responsible for the vast majority of new job creation despite their lack of eligibility for taxpayer subsidies, I have been frustrated by the ridiculous and baseless defenses used by lawmakers to justify using taxpayer dollars in this egregious manner. LeRoy narrows down a comprehensive study of the issue into an illuminating and ultimately readable treatise, wading through the many different forms that subsidies take - from outright cash hand-outs to Tax Increment Financing (TIF's) - and ultimately providing ample evidence that the "if you build it, they will come" approach is NOT responsible for new job creation in America.

This book is a public policy manual for our time; required reading for elected officials at every level who have voted - or are thinking about voting - for targeted tax subsidies. These lawmakers are creating an escalating "Economic War Between the States" at the expense of lower taxes, fair competition, and improved public services for all.

For citizens (and taxpayers), LeRoy will enlist your outrage.

For lawmakers who have voted against such disgraceful scams, he provides all the evidence needed to defend that vote in the face of a society which has been brainwashed to believe that "incentives = jobs".

Nothing could be further from the truth, and Greg LeRoy proves it.

LeRoy reports that job scams cost governments about $50 billion per year in lost revenues. The most common scams include:

1)Create a bogus competitor (another town or state) vs. wherever the company wanted to locate in the first place.

The intent is to create a "bidding war" over the freebies offered.

2)Job "blackmail" in which a company threatens to move (or locate elsewhere) unless it gets the subsidies/tax relief it wants.

Easily enhanced by overestimating the job increase - LeRoy cited examples from Connecticut in which only 9% of forecasted jobs materialized, leading to a cost of $367,910 per new job. Exaggerations are typically followed up by failure to track or publish actual results.

3)Entice a firm that pays "poverty" wages, and stick the taxpayers with hidden costs (eg. employee and family healthcare).

Wal-Mart is the most notable example.

4)Exaggerate "ripple effect" benefits - eg. the number of supplier jobs, and those created by employee spending.

(LeRoy cited an example where one city used a low multiplier to downplay jobs lost when a company left, and a high multiplier to play up the potential gain from another moving in.)

5)"Bust the union" in which the company uses Federal funding (eg.

CDBG grants from HUD) to move, and thereby break an existing union.

Obviously any and all these machinations can be combined.

Mayor Giuliani was cited as a prolific scam-"victim" - giving up $350 million in tax revenues between '94 - '01.

Small wonder N.Y. also ended up with a large deficit.

LeRoy points out that "nobody wants to be the mayor/governor who lost ______," and that fear impels leaders and legislatures to succomb.

In reality, however, taxes make up only 4-5% of location costs according to a consultant cited, and only 1.2% of total costs according to the IRS.

Similarly, convention centers are oversold (overall convention business is DECLINING - thus, new centers being built are extremely unlikely to be financially successful), and sports stadiums.

Meanwhile, LeRoy points out that a recent survey of civil engineers found that America's infrastructure needs greater funding. (My life as a truck-driver provides daily evidence of the substantial repairs and enhancements needed for our Interstates.)

The "bad news" with this book, like many others, is that to justify book printing, it ended up considerably longer than necessary - at least 2X, and probably 3X.

I hope the people who really need to read this book do read it--the state legislators and local officials who have been seduced by the arguments of the "job scammers," as Greg LeRoy calls them. As an academic economist who has been researching state economic development policy for many years, I know how hard it is to get the attention of policy makers and convince them they are wasting vast sums of tax money on corporate incentives, and in the process harming, not helping, their state's long term growth. I think Greg LeRoy has written the book that can cut through the nonsense in this debate and actually make a difference. Its readable, its colorful, its compelling, yet at the same time it is based on exhaustive, careful research. Here is finally the documentation for what many of us suspected has really been going on in the "incentive wars." My advice: buy a few extra copies and send them to your state representative or city council member. Then call them up a month later and ask them how they liked it.

This is complicated stuff, but LeRoy walks you through it bit by bit in an entertaining way that builds both your understanding and your anger. Without a hint of cynicism, he systematically exposes $50 billion in job scamming and tells how to stop it. It's so clearly written and explained, even state legislators should be able to finally "get it."

As Greg LeRoy makes abundantly clear through one rich example after another, state and local governments are spending taxpayers' money with abandon in the name of "economic development" and not producing the desired results: more and better jobs. And he puts these examples into context, explaining how the estimated $50 billion a year in business subsidies has resulted in a huge shift in the nation's tax burden - from large corporations to ordinary citizens.

For over 20 years, Greg LeRoy has been on the front lines of the effort to make state and local government economic development programs smarter and more accountable. And he and the local leaders and local organizations that he has worked with in various parts of the country have had some notable successes in adding disclosure and evaluation requirements, and job quality standards, to some of these programs. Some states and localities have even adopted money-back-guarantee requirements (frequently called "clawbacks") to deal with the countless number of situations (many good examples of which are given in this book) in which firms take big subsidies from the government and then fail to deliver on their job creation and job retention promises, and sometimes even cut their workforces substantially

I have had the pleasure of knowing and working with Greg LeRoy since 1994 and I am continually amazed by his mastery of this important subject. In this book, Greg distills his vast knowledge and experience into a well-written and entertaining volume that doesn't just explain what is going on but tells us why and what we can do to change things. Anyone who wants to improve the American economy will benefit from reading this book.

This is a quick read primer on what's wrong with the way state and local governments and corporations are selling our communities short. With colorful examples you won't forget, and clear, understandable explanations of tax and public finance policy that put law professors to shame, LeRoy shows the underbelly of the tax giveaway schemes taking place throughout the country. The Great American Jobs Scam is a must read for candidates, elected officials and others (especially voters) who care about the erosion of quality public services in communities across the country. Hopefully some journalists will give it a read and start placing the stories of tax deals for jobs on the crime pages instead of the business hype section.

At one time or another, we have all been enticed by the prospect of a major retailer, manufacturer or financial services company building a new facility or relocating to our community. As the story goes lots of new jobs will be created and the tax base will be greatly expanded. But rarely are we given all of the facts. As concerned citizens and taxpayers we are at a huge disadvantage. What we are up against in a complex network of corporations, regulators, public officials and consultants. These people know precisely how the game is played and have perfected the routine over the past 50 or more years. The end game is to extract as many concessions from a community as possible. These folks know how to pit one community against another and how to carefully cover their tracks. They are extremely adept at keeping the general public in the dark about what is really happening. It is the ultimate shell game. But author Greg Leroy in on to them. He is been monitoring these issues for more than two decades now. He knows who the players are and where the bodies are buried.

"The Great American Jobs Scam: Corporate Tax Dodging and the Myth of Job Creation" shines the light on just what has been going on and explains why huge taxpayer subsidies in the name of "job creation" rarely make sense. Essentially, our public officials have given away the store and the rest of us have precious little to show for it. Greg LeRoy cites example after example of these programs and giveaways. He explains what terms like SSF and TIF mean. He illustrates why subsidizing so called "big box" retailers like Wal-Mart, Target and Home Depot is very poor public policy. He explains how these and other major corporations are successfully evading taxes. And he points out that poor and middle class taxpayers are forced to make up the difference. This is an increasingly intolerable situation that needs to be addressed immediately.

"The Great American Jobs Scam" is an extremely thoughtful and well-documented book. We can simply no longer afford to pursue such innane and unsound policies. I will be donating my copy to the local public library in the hopes that many more will read it and begin to spread the word. Highly recommended!

Just as he did so eloquently in "No More Candy Store", Greg LeRoy exposes the dirty little secret behind economic development tax subsidies which are no more than corporate welfare give aways. Anyone working in communities struggling from disinvestment and deteriorating infrastructure should read this book. The author explains clearly and succinctly how corporate raids on the public pantry seriously shrink the budget pie leaving inadequate revenue for schools, roads, public safety and aging infrastructure. And what do our communities get in return? Nothing.

This book is well written, accessible and creates a roadmap for stuctural reform which must take place at the grass roots level. Must reading for community activists, organizers, and social equity advocates.

"The Great American Jobs Scam" is an aptly titled book. Greg LeRoy explains in detail how corporations get tax breaks and related fiscal incentives to relocate or build in predominantly suburban or rural areas. One major ill-effect of that process is lower funding for infrastructure and schools.
Sprawl is another adverse side effect.

Mr. LeRoy descibes the competition between states and cities for businesses.

He detailed how Sykes scammed states and cities to get subsidies for call centers that they would close after short periods of time while outsourcing call center work overseas. They took the money and ran.

The author also offers insight on:
+ A critical, but helpful analysis of Single Sales Factor(SSF). How it works and what the major flaws are with it.

+ One of the lures of exporting jobs and income to foreign nations- businesses pay little or no income tax to state or federal governments. Corporations also hide income made in specific states through loopholes.

+ Explains the concepts of "Nowhere Income" and the "Delaware Holding Company Loophole".

+ The "demalling" of America as big box retailers reap the rewards of large incentives. The author poses this question on that issue. "Why are we paying to kill downtowns and shutter malls and susidize companies through the back door for their poverty wages?"
"When we say no to WalMart Supercenters, we protect our Main Street merchants and the community life they foster. We also protect the jobs, wages, and health care of grocery store workers."

In addition to detailing many of the scams that corporations use Mr. LeRoy describes how the tax burden falls on the middle class and poor, while schools in poor areas also suffer as a consequence of the giveaways.

The author suggests some sensible reforms, some of which are already in use and proven. One being public disclosure of the details of incentives.

To read in-depth about an angle of corporate greed and how governmental officials fall prey to it this is the book to read! Documented and written very well.

In a topic that could quickly and easily become extremely boring this book is written with style and humor. It's hard to make taxes, abatements, and TIFs fascinating (see your eyes are already glazing over at the mere mention aren't they?), but Greg LeRoy does. He gives information on who does it (nearly all corporations with a noticeable exception of Toyota which he points out), how they do it (short answer: consultants, meaningless studies, and no accountability) and the consequences of these actions(school underfunding, road underfunding, etc). A phenomenal book that makes me greet each "success" in luring a new business to the area with increased skepticism.