Home > Uncategorized > NYTimes Andrew Sorkin Article Flatters IBM’s Political Engagement and Calls for Ban On Direct Donations to Politicians… but PILOTs Have HUGE Impact on State Local Politics… and Schools

NYTimes Andrew Sorkin Article Flatters IBM’s Political Engagement and Calls for Ban On Direct Donations to Politicians… but PILOTs Have HUGE Impact on State Local Politics… and Schools

As the title of Andrew Sorkin’s NYTimes Deal Book article, “IBM Doesn’t Donate to Politicians. Other Firms Should Take Note“, implies, IBM is presented as an exemplar when it comes to making direct political donations. I know from experience that IBM uses its considerable clout to exact PILOT (Payment In Lieu Of Tax) agreements from local communities and States, agreements that lower their taxes and shift the burden onto local homeowners. When IBM wants to locate a manufacturing plant in a community, it will set off a race-to-the-bottom bidding war between communities and States to get the sweetest deal possible on taxes. When one of the competitors in the bidding war is a community that IBM might abandon, it has the effect of creating a double whammy: if the community and the State do not pony up a sweetheart deal IBM will leave and take its jobs with it. 

IBM is far from the only corporation that does this… and as a school superintendent I found the whole process of “economic development” that accompanies the bidding for businesses repellant. In these bidding wars the business can’t lose. Businesses are, after all, trying to maximize its profits and, like every homeowner, trying to minimize paying taxes. If they don’t have to pay the going rate for State of local taxes they increase their bottom line. Many in the community accept PILOTs as the price one needs to pay to “attract and retain” good businesses and, as we witnessed in the Trump era, when a businessman/candidate avoids paying taxes they do not pay a price at the polls. The public expects businesses to gouge local and state governments. But in these bidding wars school districts, State and local governments, and— I would contend– local taxpayers lose. If the businesses strike their optimal bargain their infrastructure costs will be paid by the town and should they close down their business or fail to bring in the jobs they promised they pay no price. In the meantime, instead of tax funds being used to build or upgrade schools or roads, the funds are used to underwrite the costs of a gleaming office park or— worse— a massive warehouse that uses robot technology. In the meantime, in the “losing” community tax revenues are diminished and in the “winning” community costs are increased. In both cases, towns and school districts face the choice of cuts to service or tax increases to local homeowners: a lose-lose proposition. 

Sorkin’s call for decreased spending on political campaigns is welcome and would be a “win” for democracy.. But for schools and towns, getting out of the PILOT business would be even better. . 

 

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