Home > Uncategorized > Philanthropy in Lieu of Taxes: JP Morgan Offering $500,000,000 to 30 Cities

Philanthropy in Lieu of Taxes: JP Morgan Offering $500,000,000 to 30 Cities

September 13, 2018

Quartz published an article today by Kabir Chibber matter-of-factly sharing the news that JPMorgan will be offering 30 cities $500,000,000 in subsidies over the next five years. Here are the opening paragraphs describing this magnanimous investment:

America’s biggest bank is stepping up where governments have failed.

JPMorgan Chase is today unveiling a $500 million initiative called AdvancingCities, designed to revive growth in as many as 30 cities over the next five years (paywall). The focus will be on job training, neighborhood revitalization, growing small businesses, and consumer’s financial insecurity, the Wall Street Journal reported. Examples of society’s ills that the bank will work to address include building more affordable housing and getting commercial businesses into empty buildings.

The bank is taking applications from cities until November and will announce the winning cities by the middle of next year. In that, JPMorgan follows in the footsteps of Amazon, which turned location-hunting for its second US headquarters into something more akin to America’s Next Top Model, forcing US cities to bid against each other to land the $5 billion complex.

And why are 30 of America’s cities failing? Here’s Mr. Chibber’s analysis:

If you’re wondering why US governments—city, state, or federal—aren’t taking care of this stuff, good question. Remember that this is a nation where, despite historically low unemployment and a booming stock market, 17% of the population still get support from food stamps (paywall) and where Donald Trump wants to make it harder for millions of Americans to get access to basic welfare.

Many states have huge budget surpluses in the aftermath of the 2008 recession, while cities are crumbling to pieces (paywall). Cities are being forced to borrow more to fund everyday services and repairs, meaning that the costs of servicing debt are taking up more and more of their annual budgets. And pensions and the cost of providing public services are not exactly coming down. In Los Angeles, for example, almost 30% of the budget is taken up by all of these legacy costs combined, according to Merritt Research Services.

What ISN’T mentioned in Mr. Chibber’s analysis is the fact that many corporations are avoiding paying their taxes and/or are receiving tax breaks from cities in an effort on the part of those cities to attract and retain corporations. And who is getting paid to help corporations avoid taxes? According to one angry blogger, JPMorgan is making megabucks doing just that!

In the years from 2011 to 2014, JPMorgan made almost $200 million in fees helping companies essentially rob US Taxpayers.

So… over a three year period JPMorgan earned nearly $200,000,000 in fees to help other corporations dodge taxes, taxes that might have provided some revenue to the very cities JPMorgan is now “helping” by donating $500,000,000 over five years. But wait! That’s only one portion of JPMorgan’s tax avoidance! The NYTimes reported that JPMorgan received $22,200,000,000 in tax subsidies over an eight year period, or roughly $14,000,000,000 over a five year period! I think that will cover the “generous donation” JP Morgan is providing!

But to read the report from Mr. Chibber, which may have been provided by a press release from JPMorgan, America’s cities should be grateful:

It is in this environment that JPMorgan thinks it can make a difference. Half of the bank’s investment will be pure philanthropy via nonprofits, and the other half will be low-cost loans.JPMorgan told the Journal it also expects to tap an extra $1 billion in outside capital.

JPMorgan’s latest endeavor is modeled after its Invested in Detroit program, which the bank put $150 million into between 2014 and 2019. JPMorgan says that effort created 1,700 jobs, 100 new businesses, and trained or retrained around 15,000 people in the years following the largest municipal bankruptcy in US history in 2013.

1,700 jobs sounds impressive… but… Michigan lost over 250,000 jobs in the past several years, jobs that, for the most part, paid well, offered decent benefits and working conditions, and ensured that its citizens were comfortable. And since Detroit closed 30 schools and lost thousands of students it is likely that the school district itself lost 1700 jobs.

And here’s the real hitch: if voters are led to believe that JPMorgan can solve these problems better than government, they will continue to starve the government of revenues and let the private sector solve the problem. And how will business solve the problem? My hunch is they will take a page from the vulture capitalists playbook and eliminate those pesky “legacy costs” by outsourcing work and thereby eliminating existing contracts and pensions. That will “create jobs” but will not create well-being in the cities receiving these gifts.

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