Friday, November 6, 2009

Want to hear what a trainwreck sounds like?

Yesterday morning, Gov. Strickland appeared on Ohio's 55KRC radio to discuss the tax abatement being awarded to General Electric to keep them invested in southern Ohio.

Well, about two minutes into this clip, Ted Strickland, despite the most sincere efforts of the host to bail his butt out, goes into full bumbling, stumbling, rumbling mode in trying to explain the whats and whys of the GE tax abatement.

You can listen to the clip by clicking here.

Say "um" again, Governor.

Here's a transcript of the most intriguing part of Governor Strickland's (TS) conversation with host Brian Thomas (BT):
BT:’s a 50% job retention tax credit – so it is my understanding that means that GE is going to be taxed at a 50% reduced rate…is that for employment tax or income?

[for the sake of space, approximately 47 minutes of "uhs" were removed from the transcript for this point of the interview]

TS: It’s uh, well let’s see. That’s an interesting question. It’s $120 Million, right?

BT: Right.

TS: But that’s only a part of the program. We are also helping them with a loan. We’re helping them with a workforce guarantee grant. We’re helping them with a distributed energy resources, amount of resources. All of these together, you know, add up to a considerable incentive package.


BT: Well, I guess you end up getting a deal like this and some people get them and some people don’t. I mean this is a problem I guess I had with some of the things going on with the picking and choosing on a federal level of who gets bailed out and who doesn’t. I see the tax abatement as a good thing but I see it much like the casinos. If you’re going to have gambling, why not put it out for the open market, allow each county to decide? Put it out for RFPs and for competition. Why doesn’t the state of Ohio give this type of incentive to all businesses and that way we get all the competitive states out there, the businesses to come here and settle in Ohio because it has the lowest taxes in the country?

TS: Let me say something in regards to that Brian because I think you raise an interesting point. You know, for some reason, and it’s the way thing are developed over time, the state of Ohio really has more tools to use to try to attract new businesses into the state than we have to try to help existing businesses expand or stay here. That’s just the way the programs have developed over the years but quite frankly, I think it’s perhaps even more important to try to help existing business that wants to grow or expand than it is to try to go out and poach a business from another area.

BT: Well I hear that. I guess it seems to me you put the businesses that are here in a position of extortion. So they look at GE and say, GE got a deal with a tax abatement. Hey Governor, we’re going to leave if you don’t give it to us too.

TS: Well that happens.

BT: Yeah!

TS: That happens and that’s why we have to look at the cost benefit. For example, GE is making quite an investment on their own. I mean, this is not just taking government money…

BT: Sure. It’s not a wash in other words, we’re not paying for the development. I get that.

TS: No. We’re not paying for the development. Plus, GE is making a very definite commitment to Ohio. So, if companies have a need, they can justify it and they’re willing to put up their own resources and they’re willing to make commitments to it, I would invite any of those companies to approach us because we would be willing to try to work with any of them that would agree to those circumstances.

Wow. There's a lot there.

But I'm just going to focus on what I bolded.

First off, Brian's first bolded question hits at the meat of the matter. By providing these tax abatements, we are attracting GE, so why don't we provide such incentives for all businesses?

The non-partisan Tax Foundation nailed this point when discussing a similar issue in regards to Michigan:

For decades, Michigan has followed the path of heavy taxes on business coupled with generous tax reduction packages for selective industries. This government-picking-winners approach has been rigorously followed as the state economy continues a decline that's been occurring for about a decade.

There's another option, at least for states other than Michigan. A far more effective approach is to systematically improve the business tax climate for the long term so as to improve the state's competitiveness, by repealing all incentives and subsidies. The tax code would thus be used just for raising revenue, not for changing economic behavior. Government officials should spend their time running the government and not running around the country offering deals to businesses.

It's so simple, it just might work!


Next, Brian points out the exact point the Tax Foundation hinted at above. Businesses are stuck paying higher taxes thanks to the state government picking and choosing winners like GE. So, what incentive do these businesses have to stick around? They don't. Need an example?

How about NCR?

The state can't simply pick and choose winners. It screws not only other big businesses that aren't getting favorable treatment, but it rips the small businessman who isn't getting this kind of targeted assistance.

The scary part? Strickland agrees with him. And yet his actions as Governor clearly show he doesn't care to fix it.

And that's highlighted in the final bolded quote from Governor Strickland. If companies feel they have a need, they can come justify it to the Governor.

Governor Strickland, they all have a need. Ohio is in the middle of a crisis because of an overbearing tax climate that has punished Ohio businesses for far too long.

We need a way out.

And Ted Strickland, you seem to scared to do anything about it.

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