Sign of decline in race to the bottom
Published on -9/30/2012, 5:41 PM
By MICHAEL A. SMITH
Just off Wornall Road in south Kansas City, Mo., a painting of Kansas Gov. Sam Brownback greets commuters. From his truck-mounted billboard, Brownback's caricature shouts a cheery "Thanks!" to Missouri's people as he drives his own, cartoon truck (labeled "jobs") from a decaying Missouri into a glittering land of Oz: Kansas.
Get the message? It also references an anonymously authored website savemissourijobs.com, which warns Missourians of dire economic losses. There is only one hope: tax cuts, answering the recent Kansas cuts Brownback championed.
Scholar Paul Peterson called this the race to the bottom. He wrote that state and local governments are under constant pressure to cut taxes and services, in order to compete. People and capital are mobile, so "job creators" (in today's phrase) are always just a move away from leaving the state, depleting its tax base and costing those precious jobs.
The Kansas City area exemplifies this.
AMC Theaters is moving hundreds of employees from downtown Kansas City, Mo., to a new headquarters in nearby, well-to-do Leawood.
The incentive package for this deal cost Kansas taxpayers $40 million! Not to be outdone, Kansas City used similar tactics to lure the Applebee's headquarters from the suburbs to an under-occupied office building on the Missouri side.
None of this means any real growth for the K.C. metropolitan area or for either state: jobs are moved, not created. Commuting employees are unlikely to move their families just because their jobs shifted a few miles. For example, the new Applebee's headquarters on State Line Road is literally across the street from Kansas -- and nowhere near the "blighted areas" tax breaks originally were intended to help.
This one-up politics leaves the rest of Kansas and Missouri behind. Coffers are depleted, leaving the states to choose between raising someone else's taxes or underfunding the essential services and cultural amenities that are just as important, if not more so, when it comes to luring new businesses and their employees.
Wichita and most of rural Kansas have no handy state border to "leverage" site-specific tax breaks. Thus the deals go to certain K.C.-area employers that master the art of the shakedown, while the bill goes to everyone else.
In response, Missouri state Rep. John Rizzo, D-Kansas City, offered a bill to end site-specific tax breaks to Kansas businesses that relocate. Had it passed, the bill would have been triggered by the passage of a similar bill in the Kansas Legislature. Brownback and this state's legislative leaders have shown no interest in this truce.
Still, Rizzo might be onto something. Leaders in the Quad Cities of Iowa and Illinois made an agreement to promote jobs throughout the metro area. If officials in one state hear of a business planning to move, they call their counterparts across the Mississippi and develop a plan together. In Texas, San Antonio and Austin have a long-standing rivalry for medical and high-tech jobs, but both cities now have a requirement that any site-specific tax breaks have to fit into a larger economic plan, benefitting the whole community.
Finally, Kansas City, Kan., and Kansas City, Mo., recently cooperated to make KCK the first city in the world getting super-fast Google fiber Internet service. KCMO gets it next. What about the area's newer, wealthier suburbs, so often the winners in "race to the bottom" politics? This time, they have to wait their turn in line.
Leaders in the two Kansas Cities have a better handle on things than their counterparts in Topeka and Jefferson City. Areawide cooperation means jobs, revenue, technology and a huge "wow factor" for the community.
Alas, this is the exception, while the race to the bottom is the rule. Unless the Google deal can become a template for future growth, certain KC-area employers will continue getting benefits just by threatening to move. This process creates no jobs, but it does stick Kansas and Missouri taxpayers with the bill.
Michael A. Smith is an associate professor at Emporia State University.