Ante Freeze: Stop the State Bidding Wars for Big Businesses

At the University of Alabama's Legion Field, there's a long, rich tradition of victory. At the stadium, legendary football coach Bear Bryant and his Crimson Tide posted on of the most successful records in sports history. Now the stadium is the site for yet another Alabama trophy: A huge, $75,000 Mercedes-Benz hood ornament perched atop the scoreboard. While intended to celebrate the German car company's recent decision to locate a $300 million manufacturing plant near Tuscaloosa, it has instead before symbol of how much, in money and self-respect, the state had to give up to win the high-stakes bidding war for the plant. Not only did Alabama pony up a package of special tax breaks and other goodies for Mercedes valued at roughly $250 million, but it also agreed to buy more than 2,500 of the company's cars for state use. As the details of the deal have leaked out since its announcements last September, citizens have expressed second thoughts about it. "There are a lot of people in Alabama who think we gave the farm away," says state legislator Johnny Cagle. Among state residents, says Auburn University professor Wayne Flynt, reaction to the Mercedes deal has "gone from euphoria to fright. " Clinching The Deal Alabama's purported Mercedes coup is only one of the latest skirmishes in the bidding wars raging among states to recruit high-profile corporations, particularly manufactures, using taxpayer-backed bonds, tax abatements, special training and infrastructure subsidies, and other sweeteners to clinch the deal. The dollar-amounts continue to rise--the Mercedes deal is thought to be the largest one ever--and so does the controversy. While many economists, taxpayers, and public-interest groups have dried foul, elected officials, economic development strategists, and big-business leaders essentially have shrugged their soldiers. It's just the way things are done these days, they say. I'm surprised not so much by the intensification of the bidding--wars which, given the potential for governors and other officials to gain political points from high-profit recruitments, seemed inevitable--but instead by the complacency of those in the business world and elsewhere who see no conflict between their free-market principles and special tax breaks for big business. For example, Theodore Von Cannon, who heads Birmingham's Metropolitan Development Board and helped lure Mercedes to Alabama, recently remarked, "as long as we have a free-enterprise system, there is not much you can do " to avoid giving away incentive packages. " Corporate Welfare Dealmaking continues in spite of the controversy. The state of Virginia recently established a "partnership" with the Disney Corporation to erect a new theme park south of Washington, D.C., near the site of historic Bull Run. Virginia's new governor, Republican George Alllen, was determined to bag the theme park for his state, and convinced the legislature to provide part of the infrastructure nd other concessions Disney demanded--a package worth over $160 million. Conservative commentators have praised such bidding wars. Rush Limbaugh has spoken favorably about the recent cut-throat competition between New York, Connecticut, and new Jersey to attract or keep firms such as First Chicago Corporation, Prudential Securities, and the New York Mercantile Exchange by using special tax breaks. And George Will wrote in Newsweek last September that efforts to restrain the bidding wars (proposed by Illinois Governor Jim Edgar) would be "too bad. " Ironically, the kind of big-ticket incentives packages companies are getting today offer no check on the growth of government; indeed, they are an important reason why the state and local tax burdens on the average small business owner or taxpayer are getting heavier. Nor is the sort of "corporate welfare" provided by activist state governors a recipe of real economic growth. Yes, a few big employers may move to a state offering lavish incentive packages, thereby providing photo opportunities and ribbon-cutting ceremonies for image-conscious politicians. …