Home > Uncategorized > When Corporations Get Tax Breaks, Someone Has To Pay… and that Someone is the Homeowner

When Corporations Get Tax Breaks, Someone Has To Pay… and that Someone is the Homeowner

May 20, 2015

Earlier posts on this website, like this one titled “Tax Racket“, have decried the practice of offering huge tax incentives to private corporations on the premise that they will either leave town and go somewhere else or the premise that they will reap huge benefits to the community.

That earlier essay was brought to mind when I read Deborah Scott’s post titled “Someone Has To Pay” in this past weekend’s Chattanoogan.com. Ms. Scott provides several specific examples of very generous tax breaks (or Payments in Lieu of Taxes (PILOTs)) that the counties in the Chattanooga area offered, including this blatantly irresponsible action:

In 2008, Volkswagen received incentives from local, state and federal sources equaling approximately $840 million. This figure included commitments from Chattanooga and Hamilton County for $245 million. [Additional incentives were granted to VW in 2014, but why talk about the additional millions. We have already been told those millions will come from the city and county’s reserve funds. Folks, that reserve is our rainy day fund.]

In the meantime, public services— like public schools— are scrambling for money because valuable commercial property is no longer bringing in the same revenues and the County Commissioners have pledged to keep homeowners’  taxes flat. This combination of corporate largesse and refusal to raise property taxes leads to a manufactured crisis… and at the conclusion of her post, Ms. Scott poses the right questions:

If the economy is significantly stimulated by the use of PILOTs, where is the positive  effect? If the local economy is humming from PILOT businesses, why aren’t other revenue streams growing and making up for lost property tax revenue and increased expenses? Are PILOTs the magic bullets for economic success?  If so, why do city and county property taxpayers feel they are under the gun? 

I cannot answer the questions about PILOTs in Chattanooga. I know that public schools are expected to account for every dollar they spend and as Superintendent in many districts I was asked to prove that forecasted savings actually materialized. Private corporations are seldom held to such a standard by locally elected officials or State and Federal governments. Consequently there is no means of determining whether PILOTs have a net positive effect on the tax base or add to the quality of life in the community. On the macro level it is clear what is going on: the major shareholders of corporations, the top .1%, are accumulating vast wealth while the bottom 95% have seen no substantial change in their earnings for decades. The revenue starved city, county, state and federal governments cannot turn to the 99% for resources because they have none and they are fearful of turning to the 1% who make decisions for major corporations for fear that they will abandon the community altogether. And that’s the answer to the final rhetorical question Ms. Scott poses.

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