What are the Negatives of Cooperations Moving for Tax Breaks?
Think Piece/Open Discussion
Montreal used to be the center of Canadian banking but when the laws to protect French forcing corporations to apply French were adopted, the banks and other businesses turned to Toronto as the new option. Then, the Ontario government offered tax breaks to banks that settled in Toronto. Many people have always questioned the idea of some form of inertia in a corporation that would prevent it from moving around every time there is an area in a country that offers lower tax rates. Is there this formulation of an inevitable tax bidding war and will that be compatible with the well-being of our populations?
Yes, there are inevitable tex bidding wars, but these aren’t bad per se. The issue is local governments often never consider the full effects of a company or multiple companies moving into their area. This usually ends up being the bad aspect of this whole scheme.
Politicians in the local areas always want to get things done so they can show constituents what they can do and eventually get re-elected. Ultimately, there’s no better way to do so than saying “We brought companies A, B, and C into our area!” So they will continue to increase tax benefits to get a company to come without ever considering infrastructure struggles that are inevitable to come.
In the United States, Seattle decided to give Google, Amazon, Facebook, and Microsoft free reign over the area, and yet they don’t even have a light rail system that functions properly and will never have one until MAYBE 2040. The housing infrastructure in Seattle is also falling off and the advancement of the housing infrastructure is too weak to handle high-paying jobs. Now, Seattle just has a high cost of living, and lower-income individuals struggling. Local politicians are split on beliefs as some say “We brought Google, Facebook, Amazon, and Microsoft to Seattle!” While others say we need to keep these companies accountable for helping build the proper infrastructure needed so it doesn’t screw over the existing population.
Politicians in general like the idea of a big score. A group of 5,000 small businesses employing 10 individuals each will pay for everything while a massive factory employing 50,000 people will have the government rolling out the red carpet every time. Infrastructure upgrades, 20 years of near-zero taxes, all the handouts you can imagine.
The government shouldn’t be able to make these deals. If cutting taxes to attract businesses is the route to go, cut them. However, it should be cut to everyone equitably. The Constitution specifically bans the “Bill of Attainder” or the legislation that has been crafted to punish or reward a particular entity. Congress found an end run around it — Evading the spirit of the Constitution isn’t an admirable quality in a lawmaker.
On the flip side of the argument, however, more times than not if something works to boost your economy — which massive cooperation does — you would want to attract these things and scale what’s working best…