Thanks to Government Incentives, It May Be Cheaper to Locate a Service Center in Columbia, Mo., than in India

The Columbia Missourian recently published a summary of the $31 million incentive package that the state and local governments are providing to IBM to persuade it to locate a service center in Columbia, Mo. It includes more than $28 million in state tax credits.

From the article:

State incentives:

• $8.6 million through the Missouri BUILD Program
• $14.7 million through the Missouri Quality Jobs program
• $4.2 million in new jobs training
• $300,000 for customized job training
• $412,500 worth of recruitment assistance
• Sales tax exemption on personal property under the Chapter 100 program

Local incentives:

The city of Columbia will buy the building at 2810 LeMone Industrial Blvd. for $3 million and will lease it to the company for $1 per year for 10 years with an option to extend it for an additional 5 years at the same price.

Boone County will provide a 50 percent property tax abatement on personal property for the depreciable life of equipment and will exempt personal property from sales tax.

According to another article in the Columbia Missourian, IBM has promised to bring 600 jobs to Columbia during the next 10 years. Given the $31 million incentive package, this means that taxpayers will be subsidizing each job by $51,670. Meanwhile, IBM will only have to pay its employees a minimum average annual wage of $43,750, and it will contribute zero property tax revenue. In exchange, IBM will provide exactly $10 in rent over 10 years.

Furthermore, because the city owns the property and is leasing it to IBM, the company will not have to pay property taxes on it — this is a bigger subsidy than the $3 million the city paid for the building. IBM will not be required to contribute personal property tax revenues for this facility to the state government, either.

The government shouldn’t carve out sections of its tax base, via methods like property tax abatements or tax increment financing, because this type of behavior shifts and increases the burden to those who do pay taxes. Additionally, this $31 million cannot be spent on other services, like education, or returned to taxpayers to spend in the private sector.

The incentives may increase employment in Columbia in the future, but given that the increase will come at such a supreme cost, it may not be worth it.