Government must put an end to Marriott-like deals

April 15, 1999|By Ralph Nader

SUPPOSE you own a small business that employs six workers. You write a letter to your state's economic development agency, stating that you won't move your business out of state if the state does not tax you, gives you job training credits and other freebies.

The state agency would tell you to get lost.

Now change the scene and the scale. Marriott International Inc. -- which generated $7.96 billion in revenue last year -- had threatened to move its corporate headquarters from Maryland if it didn't receive incentives to stay. Virginia joined the bidding war with Maryland.

Marriott chairman J.W. "Bill" Marriott Jr. is a conservative, fervent free-enterprise advocate who makes speeches about the glories of free enterprise. Except he demands that his giant hotel chain be placed on big-time welfare.

What Big Bill wants, he gets.

The Maryland General Assembly recently granted Marriott International $44 million in loans, grants and tax credits to keep it from moving out of state.

When big businesses such as Marriott receive public subsidies, they gain a competitive advantage over their smaller competitors. Also, property tax exemptions for such businesses, or equivalent credits, diminish the tax base that pays for schools, police, fire fighters and a host of other public services. Yet Marriott, which escapes millions in taxes, still uses these services, which it does not wish to help pay for.

When asked about this rejection of expected community obligations, the Marriotts and their ilk point to the economic impact of public investment in their private businesses. But that is true for other smaller businesses, too. What these big businesses are really saying is that sheer size and power gets special privileges.

When one state fears losing a business to another state's corporate welfare package, a frantic atmosphere takes over in many legislatures. They give away subsidies, at the expense of middle-class taxpayers, without any reciprocity to the public investment.

As William Skinner, president of the Maryland Taxpayers Association, wryly said: "We didn't elect legislators and all these county people to be venture capitalists."

So, how can the public stop this corporate welfare frenzy? First, there should be a constitutional challenge, contending that such tax inducements, designed to lure companies across state lines, violate the interstate commerce clause. Such an argument has been made in an article in the December 1996 issue of Harvard Law Review.

Second, states could agree not to engage in such bidding wars for businesses. Studies show that such deals are often a wash for the state and a windfall for the corporations.

Third, the federal government could apply a surcharge to such subsidies or pursue comparable policies that cancel out these tax inducements to relocate, or prohibit them in the first place.

The frenzy is truly angering many Americans, especially when these corporate subsidies are extended to proposed gambling casinos as in New Jersey or professional sports stadiums all over the country.

Meanwhile, how many times do you hear lawmakers say there is no money for pressing community needs, such as repairing schools and city infrastructure?

House Budget Committee Chairman Rep. John Kasich, an Ohio Republican, will hold hearings on corporate welfare next month -- the first of their kind. Send him your expressions of support. He'll need them, given the thousands of corporate lobbyists in Washington.

Ralph Nader is a consumer advocate with the Congressional Accountability Project, P.O. Box 1446, Washington, D.C. 20036.

Pub Date: 4/15/99

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