As of July 2014, Mississippi has the highest unemployment rate in the nation, 8 percent. I remember in the 90s when Mississippi’s unemployment rate was two full percentage points better than the national average.
Mississippi’s horrible numbers are followed by Georgia at 7.8 and Michigan and Rhode Island both at 7.7.
Alabama is 7.0. Louisiana is 5.4. Tennessee is 7.1 and Arkansas is 6.2. South Carolina, the state demographically most like Mississippi, is 5.7. Texas is 5.1.
Our political leaders love to talk about jobs. Gov. Phil Bryant loves to talk about how many “golden shovels” he has in his garage from groundbreaking ceremonies, but the reality is not good.
Mississippi ranks No. 2 in the nation in sweetheart deals to politically connected companies looking for big tax breaks. I would argue these two statistics are no coincidence.
Most jobs in Mississippi are provided by small business. These small businesses are getting taxed more so the big businesses can get a sweetheart tax break. This creates a bad business environment that restricts growth.
I have written on this subject before, but it bears repeating in light of our state’s abysmal jobs situation.
Consider the Yokohama Tire plant as an example. Last year, Bryant and the Legislature gave this company $330 million in incentives, according to an analysis by the Associated Press.
The incentives are in the form of waived corporate, sales, franchise and property taxes. In addition, the state will give the company hundreds of millions in direct financing, guaranteed by the taxpayers.
In essence, Yokohama Tire is one massively subsidized state enterprise. Just like China.
As it stands, Yokohama plans to hire 500 employees in West Point next year. Yokohama promises to hire up to 2,000 in the future, but often these rosy employment promises never pan out.
Dividing the $330 million in Yokohama incentives by the 500 jobs comes to $660,000 a job. At that rate, the government could just invest the money and pay the 500 employees the interest. They would make the same amount of money and not even have to work!
Even if the 2,000 jobs materialize, you are still looking at $160,000 per job. You would be hard pressed to find a single company in Mississippi worth $160,000 per employee.
Mississippi has 1,266,300 people in its civilian workforce. The 500 Yokohama jobs expected next year represent one out of 2,500 jobs in our state – a tiny percentage.
Put another way, if Mississippi values each job in Mississippi at $160,000, then the 1,266,300 jobs in Mississippi are worth a total of $208 billion. That’s 2.4 times the entire annual GDP of our state.
Any way you crunch the numbers, the price per job for luring these big companies makes no sense. Ultimately, the other businesses and taxpayers of Mississippi must pick up the bill. It gets even worse when you think about this logically. Where do those 500 jobs come from? If they all come from out-of-state, then it really doesn’t benefit existing Mississippians at all.
If the jobs come from existing Mississippians, then there is no net increase in jobs. You are just moving jobs out of one pocket into another. The Yokohama jobs are coming from its Tupelo competitor, Cooper Tire.
Only if 100 percent of the Yokohama employees come from the ranks of the existing unemployed, could you even begin to make a case. Unfortunately, most of the chronically unemployed have low skill levels. These are not the people likely to be employed by Yokohama. Even then, the numbers don’t work.
In the end, Mississippi loses $330 million in tax revenue and gets nothing in return. This stifles growth.
Let’s not even mention the hundreds of millions in state money down the drain in failed startups like Kior biofuels and Twin Creeks solar panel ventures.
Numerous academic studies verify the problems of playing favorites with incentives. A recent Cornell study, “Incentive Use Among U.S. Local Governments: A Story of Accountability and Policy Learning,” finds “Our model results suggest that governments that rely most heavily on incentives may face more intergovernmental competition, stagnating or declining economies, and lower tax bases. For such governments, business incentives may contribute to a cycle of destructive competition.”
Good Jobs First rates Mississippi No. 2 in the nation, per capita, with $2.3 billion in “megadeals” and a population of just three million. Only New Mexico beats us in crony capitalism. In contrast, Texas, with nine times our population, has only $3.1 billion in megadeals. Georgia, with nine million people, has half the megadeals of Mississippi. (If you added the Kemper power plant to the megadeal total, Mississippi would be No. 1 in the nation by a long shot.)
Ironically, these sweetheart deals constitute socialistic government planning, promoted by Republicans who are supposed to understand the primacy of the free market.
Should we just give up? Of course not. Having a pro-business environment in our state is crucial. But it should be done in a sensible, fair way that applies to all and respects the free market. South Dakota, Wyoming, Nevada and Washington have no corporate tax. The average unemployment in those states is two percentage points lower than Mississippi. The Tax Foundation think tank rates states for having a pro-business tax policy. Mississippi is not in the top 10. Getting in the top 10 would be a better path to growth than letting government bureaucrats pick and choose winners and losers on an ad hoc basis.
Wyatt Emmerich is the editor and publisher of The Northside Sun, a weekly newspaper in Jackson. He can be reached by e-mail at [email protected].
The Dispatch Editorial Board is made up of publisher Peter Imes, columnist Slim Smith, managing editor Zack Plair and senior newsroom staff.
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