Round Rock is giving special benefits to newly-arrived businesses, but only a select few chosen by the city council. This practice, commonly known as “corporate welfare,” is harmful and unfair to the community on many levels.
The city has recently made deals with a slew of favored businesses, including a boutique hotel, lighting manufacturing company, and an indoor waterpark resort. As a reward for coming to Round Rock, the city will give those businesses benefits such as cash payments, reduced property taxes, waived development fees, and even shared tax revenue.
The city’s website describes how incentives are “often necessary” to attract desirable companies and that the cost is well worth it if it means creating more jobs and spurring economic development. They cite past deals with Dell, Emerson, and IKEA as examples of how offering tax-funded incentives brought big companies to town.
Yet this perspective is skewed and incomplete.
First, this practice is wrong because it allows the local government to pick winners and losers and does not give all businesses an equally favorable playing field. The city recognizes that lowering property taxes and removing miscellaneous fees are beneficial to economic growth, so why not offer it to all local businesses? Doing so would spur growth across the entire city and create more prosperity for everyone, not just a handful of companies that the city chooses.
Second, special benefits are hardly a deciding factor for companies to move to Round Rock, and for the city to take credit is misleading at best.
For example, in 2011 the city pledged $1 million in benefits to tech-giant Emerson who built their headquarters in the area. That year, Emerson’s revenues amounted to around $24 billion.
That means that Round Rock’s corporate incentives, paid by the taxpayer, were worth roughly four one-thousandths (0.004) of a percent of Emerson’s annual revenue. To put it in perspective, imagine looking for a job and receiving several salary offers of $50,000, but one employer throws in a $2 signing bonus.
Companies move to a location for a variety of strategic reasons other than incentives. Toyota and Mazda are great recent examples; they were offered over $1.6 billion from North Carolina to build a new joint-manufacturing plant in the state, but the companies picked Alabama instead, despite receiving $700 million less in handouts.
If the city wants prosperity for everyone, it would stop picking and choosing a few businesses to receive special perks and instead give all residents the same advantages: lower taxes, fewer regulations, fewer needless fees. Those are some of the most attractive and truly beneficial incentives a city could offer.