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Corporate Welfare / Subsidies

I “Think” We Have a Problem Here

By Michael Rathbone on May 6, 2015

When I read about the state’s decision to suspend one of its tax incentives to IBM because of low employment numbers at their service center, I felt it was closing the barn door after the horse had bolted. The state had already awarded IBM $10 million in incentives, so the fact that it was revoking the BUILD credits—one of many incentives IBM was receiving—leaves a sour taste in my mouth.

In 2010, the state and city combined to give IBM a sweetheart deal in order to lure them to Columbia. The BUILD incentives were just one of many carrots IBM received. The others included:

  • $14.7 million through the Missouri Quality Jobs program
  • $4.2 million in new jobs training
  • $300,000 for customized job training
  • $412,500 in recruitment assistance
  • Sales tax exemptions and tax abatements for personal property

The cherry on top of this deal was when Columbia leased a $3 million building on LeMone Industrial Blvd. to IBM for one dollar a year. IBM was supposed to create 600 jobs at this call center by 2013. As of March 2015, the center only has 453 employees. Hence the BUILD incentives, which required a minimum of 500 employees at the center, were suspended.

We wrote that these incentives to IBM were not a good idea back when they were originally awarded. Tax credits are not a good economic investment for the state to be making, and cities, including Columbia, should not be hollowing out their property tax base by buying buildings so they can lease them to favored businesses. If the state and its cities really want to help businesses, they should keep taxes low for everybody.

The failure of tax credits to deliver promised economic benefits is not isolated to Columbia. I hope policymakers can learn from these examples and stop trying to pick winners and losers with subsidies, but I won’t hold my breath.

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Michael Rathbone

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