Tax Incentives Attracting Local Business Ignore Local Labor
Tax incentives have long been successfully used as a common tool of government to encourage economic development. Originally, the Tax Increment Financing (TIF) program was designed to attract new business to areas that had lost industry, or were in need of creative economic growth. But today many believe that the system has become nothing more than a corporate gift-giving program.
Tax incentives should require conditional measurements that induce the use of local labor in these construction projects, and punish the use of outsourced labor. The difference in costs would be small, while reflecting the true intent of economic development partnerships.
For the large-box retail chain deciding between two possible expansion locations in two neighboring cities, the community that offers the most attractive tax break stands a better chance of getting the project. However. there are, sadly, no strings attached to the construction of their new tax-supported location regarding the use of local labor.
Corporate developers typically use their ‘connected’ out-of-town contractors and out-sourced laborers from previous projects, leaching the potential for economic development from the community. Suppliers of concrete, asphalt and other building materials that are available locally are also left out of the incentive programs, stripping additional revenue-generating potential from the community.
State legislators are quick to pat themselves on the back for their relationship-building skills that often result in bringing new development to their constituents, but are equally quick to ignore the true price tag paid by local tax payers in the form of jobs lost. Local legislatures completely ignore the need of the local work force and the labor market.
According to Mike Smith, business agent for Laborers Local 751 and a strong supporter of the Buy Local/Hire Local campaign, for every dollar earned by local tradesmen and material suppliers in the course of new construction, that dollar is passed seven times within the local community; for food, clothing, entertainment, school supplies, big-ticket items such as property taxes and other purchases that constitute real economic development. It’s a built-in ‘pay-it-forward’ system that benefits all.
When that dollar is lost to outsourced contractors, laborers and material sources during construction, so is the economic benefit to the community as a whole. Perhaps in the mind of some legislators, local prosperity is over-rated compared to the gain provided by corporate campaign contributors.
Since it’s reasonable to assume that with or without tax incentives, corporate developers only invest in those communities that present a high expectation of profit, one has to question the reluctance of legislators to protect local jobs in exchange for the TIF.
Communities throughout Illinois are reaping very little off the deal, certainly far less than should be expected. Once the process of pitting one neighboring community against the other for the project is complete, there are few, if any guidelines that support local labor or business during the construction project itself.
Tax incentives should require conditional measurements that induce the use of local labor in these construction projects, and punish the use of outsourced labor. The difference in costs would be small, while reflecting the true intent of economic development partnerships.
Horwitz, Horwitz & Associates is proud to sponsor a special ‘Online Labor Radio Series’ dedicated to this and other important issues that impact organized labor.
Pre-recorded and available online 24/7, you can learn more about the impact of current economic development partnerships involving tax breaks at the expense of local laborers, and how you can help move the Buy Local/Hire Local campaign forward.
Please join us online for an engaging discussion with Mike Smith of Laborers Local 751 by visiting: http://www.horwitzlaw.com/Our-Library/Labor-Audio.htm.
For more information about a free audio sponsorship regarding an issue important to your trade or local, please contact Rosemary Roberts at rosemary@horwitzlaw.com.
Cliff Horwitz welcomes your comments on this article and can be reached at (866) 228-5016, or by visiting http://www.horwitzlaw.com/.