Jobs Without Bribes

January 2018
By Mark Funkhouser  |  Former Publisher
Former publisher of Governing and former mayor of Kansas City

This month, as they do every January, our editors and reporters provide snapshots of issues to watch, ones they think will get a lot of attention in state legislatures this year. Ranging from taxation to health insurance to the opioid crisis, these will be top-of-mind for lawmakers as they return to session. But there’s one other issue I wish would get more attention from legislators: curbing the use of tax incentives and other giveaways for economic development.

There’s little chance of that happening anytime soon. Shoveling taxpayer cash to corporations is almost universally embraced by Democrats and Republicans alike. Witness the frenzied competition to lure Amazon’s second headquarters. At a time when the financial condition of many jurisdictions is fragile at best, Amazon got 238 proposals from cities and regions in North America promising millions, sometimes billions, in tax breaks. There are certainly a few savvy folks who have said no to bribing Amazon. San Jose, Calif., Mayor Sam Liccardo, for one, wrote in The Wall Street Journal that his city wouldn’t be offering incentives because they’re “a bad deal for taxpayers” and “don’t generate revenues commensurate with public expenditures.”

Liccardo is right, as plenty of research has documented. Instead of chasing Amazon, here’s a better idea: incentives for employee ownership. A recent study by the National Center for Employee Ownership found that high school-educated employee-owners had 83 percent greater median household wealth than similar employees at other companies. Among people of color, wages were 30 percent higher for employee-owners compared to other workers. For families with young children, employee ownership meant nearly twice the median household net worth.

A few jurisdictions are beginning to explore this alternative. Legislation was introduced in Wisconsin that, among other things, would provide a capital gains tax exemption for employee ownership; loans and a loan guarantee program to finance conversions of companies; and public procurement preferences. New York Gov. Andrew Cuomo has signed legislation to study how his state might support employee ownership. And in Newark, N.J., Mayor Ras Baraka launched an employee ownership initiative within his city’s Community Economic Development Corporation.

These are small steps, but they’re a start that might spark enough interest that revisiting tax incentives and embracing employee ownership will become one of next year’s issues to watch. I hope so.