The DC Council Thinks You’re Stupid

Specifically, Councillors Jack Evans, Kwame Brown, David Catania, Vincent Gray, Marion Barry, Muriel Bowser and Mary Cheh. These are the sponsors and co-sponsors of the “Global Security and Aerospace Industry Tax Abatement Act of 2010“, a proposed tax giveaway to gigantic war contractor Northrop Grumman. In the midst of a budget crisis, they believe our scarce resources are best used throwing $25 million at a rich, politically-connected corporation? It’s just infuriating that even in an overwhelmingly liberal Democratic city, the politicians here claim the budget shortfall is causing them to make cuts to schools, public transportation, homeless shelters and even failing to provide core emergency services like snow removal, yet have the gall to offer millions in tax breaks to a top defense contractor already bloated on the taxpayer dole. It’s a very telling statement about where the priorities of these elected officials really are.

Here’s some background on the Northrop Grumman corporate welfare bill:

Northrop Grumman Corp. would receive $25 million in incentives to relocate its headquarters to D.C. under a bill introduced Tuesday by the D.C. Council.

The “Global Security and Aerospace Industry Tax Abatement Act of 2010” would provide $19.5 million in real estate tax breaks over 10 years and up to $5.5 million in grants to offset relocation costs the company could incur in its planned move from Los Angeles.

The bill is sponsored by Councilman Jack Evans, D-Ward 2, along with six other of the city’s 13 council members. Evans said the bill “sends a clear message to Northrop Grumman that we are absolutely interested in having them as one of our corporate citizens.”

He said if the city can provide a comparable financial package to the suburbs then he believes D.C. has a chance to land the company because of its proximity to the Capitol, White House and Pentagon.

Yes, that’s probably true. DC does likely have some chance or other to get the company’s HQ within its borders. However, those tax incentives probably wouldn’t be what brings them here. Good Jobs First has spent a great deal of effort chronicling the nefarious impacts of such giveaways (and is a great resource for further research on the subject if you’re interested). As the case of subsidies for foreign auto assembly plants shows us, corporate decisions on where to locate their activities generally are predicated on two major factors: proximity to markets and labor costs (in terms of corporate headquarters, quality of life in the region also makes a difference).

Taxes do matter, but to a much lesser extent than the other considerations. Often, a company has made up its mind where to locate before an announcement is made, then it plays neighboring local jurisdictions against each other to secure a nice chunk of change from the state or locality where they were going to go anyway.

And that extortion money offered by the city, in this case DC? It’s not exactly money the city can afford to spare:

All the subsidies are subject to inclusion in the city’s budget, which would add to hundreds of millions of dollars of budget gaps already expected in the coming years….

The company would also likely qualify for further tax breaks through a 2000 law aimed at luring tech companies. Called NET 2000, the legislation offers to eliminate the city’s 9.98 percent franchise tax for five years and charge a 6 percent rate thereafter.

Well, yeah. Sure sounds like a boondoggle. But…..really, it’d be worth the investment and create tons of new jobs for the city, right?

Fenty has said his administration will do whatever it can to lure Northrop’s headquarters and an expected 100 to 150 new jobs to the area. His deputy mayor for planning and economic development, Valerie Santos, says she was “working very aggressively” to assemble a package for the company that would beat those being offered in Maryland and Virginia.

$25 million – and possibly much more – for just 100-150 jobs going to people who are probably gonna live in Virginia? DEFINITELY a boondoggle. It’s truly amazing that nearly half of the overwhelmingly Democratic city council would consider this to be a prudent measure of their tax dollar priorities.

Thankfully, this all may very well be a moot point here anyway.

Sources on the public and private side of negotiations have said the Meridian Group’s National Gateway in Crystal City is leading the pack of potential sites.

And that’s why I brought up all that stuff about the uselessness of tax incentives in influencing relocation decisions. Chances are, Northrop Grumman has already decided to go to Crystal City, simply because it’s a stone’s throw away from their cash cow in the Pentagon. If they do end up coming to DC, it’s because they’d rather be closer to the White House and Congress. Location location location, baby.

Neither DC nor Virginia should get suckered into thinking it’s about anything other than that.

But just in case, definitely drop the offending Councillors a call or e-mail, especially chief sponsor Jack Evans. Let them know just how much you appreciate their pro-corporate-welfare priorities.

-Jeremy

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