Aegis editorial says corporate welfare is a vicious circle

September 06, 2012|Editorial from The Aegis

The shouting's over. Harford County has either won or lost, and the credit can now be taken even as the blame is being assessed. There is, after all, plenty of both to go around.

The issue at hand is the securing by Harford County of the U.S. headquarters of the British firm Smith's Detection, which makes X-ray and scanning equipment, mostly for government agencies. The company promises to bring 225 new jobs to the area, and there are folks who want to claim credit for that. As part of the effort to lure the firm to Harford County, it was granted a $100,000 county training grant, over the objections of members of Harford County's vocal and conservative Campaign for Liberty organization.

Given the large number of relatively high-end jobs associated with the Smith's Detection move to make Harford County its HQ, the training grant amounts to a drop in the bucket. The company and its employees will re-pay that in taxes in a matter of months.

Still, there's something a bit askew about a firm — be it one based on foreign soil like Smith's Detection, or a homegrown operation — accepting grants and tax breaks from state and local governments. This goes double when the company in question, like Smith's Detection, derives most of its business income by selling products or services to government agencies.

Sure, it's only $100,000 the county is out because of the county government's support of a business that will be selling a lot of product to the federal government. What parks and recreation program in Harford County couldn't find a nice project to pay for with $100,000? What school couldn't come up with a few repairs that could be made sooner and better with an extra $100,000?

Heck, what taxpayer wouldn't like to see the effect of $100,000 being cut from the county budget here and there resulting in tax decreases? That figure, after all, amounts to 40 cents per person in the county. Not a lot, but Harford County doles out a lot more than $100,000 a year in tax breaks and grants to businesses.

Unfortunately, Harford County isn't the only company to engage in paying tribute to corporations in hopes of attracting jobs. This has become the American definition of what it means for a state or county to be "business-friendly."

In this case, Harford County was the winner, and the jobs and economic impact that can be expected will be substantial and positive. Meanwhile, Danbury, Conn., and Morristown, N.J., will be the losers as Smith's Detection will be closing operations in those communities and relocating staff from there to Harford County as the new location comes online.

Given the nature of this scheme, however, Harford County is likely to end up on the losing end of such deals in the future. There's always another county or city government near a government installation that will be willing to offer more in the way of tax breaks and grants to other firms that may be looking at operating out of Harford, or are already here.

In the Smith's Detection case, the Campaign for Liberty may well have been protesting the right thing for the wrong reason. It really doesn't matter that much that Smith's Detection is a foreign firm. What matters is that when any large business is able to exact grants and tax breaks from a government, that business is more likely to leave for even better grants and tax breaks down the road, even as the citizenry that was here to start with ends up paying more than its fair share.

Smith's Detection and the other firms can't be blamed for this. If money is being offered, they'd be fools not to take it. We need only blame ourselves for allowing our governments to let tax breaks be the definition of what constitutes business-friendly.

A truer definition of a business-friendly community is one that has up-to-date infrastructure, a learned workforce and nice places for its managers and employees to settle and live. A business that settles in a community to take advantage of such amenities will have few reasons to move. These things aren't free, and you can't pay for them by not collecting taxes.

Unfortunately, as long as everyone is doing it, everyone is likely to continue doing it.

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