States are engaged in economic warfare on each other and it's costing taxpayers billions of dollars. That's the message of a new report from Good Jobs First titled The Job-Creation Shell Game.
Every year states and localities give billions of dollars to corporations to get those companies to relocate jobs to their state. According to the study, many companies do move, eliminating jobs in the old state and wasting money in the new state, since these moves have little impact on the new state's economy.
"What was long ago dubbed a Second War Between the States is, unfortunately, raging again in many parts of the country," said Greg LeRoy, executive director of Good Jobs First and principal author of the report. "The result is a vast waste of taxpayer funds, paying for the geographic reshuffling of existing jobs rather than new business activity. By pretending that these jobs are new, public officials and the recipient companies engage in what amounts to interstate job fraud."
Even more money is wasted on what LeRoy calls "job blackmail." Companies threaten to move their operations to other states and demand that their current state give them money to stay.
The jobs that are pirated from one state to another are funded through a variety of methods: property, sales and income tax breaks, land and infrastructure subsidies, low-interest loans, "deal-closing" grants and others. Some states even finance relocation costs for company executives. When companies do move, it just doesn't cost a state jobs, it also shrinks the tax base, which in turn leads to less funding for education and infrastructure.
The report offers several solutions for the problem. The first is for states to demonetize interstate job theft and only subsidize actual new jobs that are created. Most states already refuse to pay for companies to relocate within state borders, this proposal would just expand that to out-of-state transfers. A second suggestion is for states to end business recruitment activities aimed at pirating jobs from other states. Finally, Good Jobs First recommends that the federal government target economic development funds that change their policies on interstate job theft.