Tennessee and its local governments are bending over backwards to give tax breaks to corporations in backroom recruitment deals.
Memphis Mayor AC Wharton said critics of such deals should "shut up" when he was criticized by the Shelby County Commission for a request that the county spend $1million on public infrastructure to support Japanese-owned Mitsubishi Electric's plan to build a $207 million factory in the city to produce electrical transformers.
"We're becoming a very easy target. ... We're going beyond (tax breaks) to where we're making direct capital investments in these companies, and I'm not sure we should be doing that," Commissioner Harvey said.
An AP article from 2/11/2011 points out that the commissioner is right to be concerned: "It's recently become an article of faith for many governors as they try to attract jobs: raising taxes during a recession is a nonstarter, choking off growth and damaging a state's fragile economic recovery.... But there's a catch to the anti-tax, pro-business rhetoric: Businesses consider a range of factors when deciding where to locate, including the quality of schools, roads and programs that rely on a certain level of public spending and regulation. And evidence suggests there is little correlation between a state's tax rate and its overall economic health.
"Concerns about taxes are overstated," said Matt Murray, a professor of economics at the University of Tennessee who studies state finance. "Labor costs, K-12 education and infrastructure availability are all part of a good business climate. And you can't have those without some degree of taxation."
To read the full article, go here.
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