Incentives for tire plant are excessive
The price tag to attract a $1.45 billion, 2,500-job Continental AG tire plant to Hinds County continues to climb. An Associated Press analysis shows about $600 million will be given to the company in state aid and tax abatements.
Lawmakers on Thursday approved for the state and Hinds County to borrow $263 million for improvements to a 900-acre site where the plant will be constructed.
The AP found that breaks on property, income, franchise and sales taxes, as well as an agreement to pay the majority of state income taxes collected from Continental workers to their employer, is worth hundreds of millions.
State officials say Mississippi will come out ahead in the end. College Board economist Bob Neal said that just subtracting the cost of repaying the bonds, state tax revenue would be $487 million ahead by 2040, AP reported. Subtracting an additional $265 million worth of incentives would still leave the state more than $220 million ahead, according to AP.
Those figures assume the business is successful and those 2,500 employers are working and contributing to the state economy. What happens if the business fails?
It’s not likely to happen. It’s not as risky as the failed solar project or the failed biofuels company the state forked over millions to. But it’s no guarantee.
Aside from the issue of whether public funds should go to economic development efforts like this, why do state lawmakers feel the need to spend hundreds of millions to bring a company here? Just because they plan to hire 2,500 people?
What about the thousands of small businesses in the state that drive Mississippi’s economy? Where are the piles of cash for them?
Nationally, companies with fewer than 20 employees make up about 90 percent of all businesses. Small businesses account for about half of all private-sector payroll.
If the state is itching to dump millions to boost employment, why not give it to the small businesses who keep the economy running? I’m sure most businesses would love to be exempt from income taxes for the next 25 years, just like Continental. Or have their franchise tax limited to a ridiculously low number. Or get the numerous other incentives and tax breaks that Continental will receive.
I’m not suggesting the state actually do the same for small businesses because I don’t believe it’s the government’s job to buy land and build production facilities for private businesses. Tax dollars shouldn’t be spent to help private businesses expand or become more profitable. The government should create a businesses-friendly environment and stay out of the way.
But the spend-as-much-as-you-can-to-attract-big-business approach has taken root. Mississippi is forced to compete with surrounding states, and the state willing to hand over the most money typically lands the business.
I don’t necessarily blame Continental for taking advantage of the system. If lawmakers are willing to hand over piles of cash, why not take it? As voters, however, we should decide if our lawmakers were wise to spend hundreds of millions ($240,000 per job promised) to help Continental expand its bottom line.
Luke Horton is the publisher of The Daily Leader.