First-ever binding end to a border war: Missouri-Kansas UPDATED

(Dan here late….August 2 post) Kansas Governor Laura Kelly has just signed an executive order that prohibits state subsidies being used to move existing Missouri firms in four Missouri counties to three Kansas counties, which together make up the Kansas City metropolitan area. Unlike previous voluntary no-raiding deals, such as NY-NJ-CT, Council of Great Lakes Governors, and even Australia’s Interstate Investment Cooperation Agreement, this is not a voluntary agreement, but one with the force of law, a first in the country’s history.
The binding nature of the agreement comes from the fact that both states have legally bound themselves. In June (h/t New York Times), the Missouri legislature

New article in Shelterforce highlights EU state aid rules

Greg LeRoy and I have written an article at Shelterforce explaining the basics of the European Union’s rules governing subsidies, or “state aid” in EU-speak. As the article is ungated, and regular readers will remember much of the detail, I will not quote it here. Suffice it to say that the continuing reverberations of Amazon’s HQ2 project have opened space to shine a brighter light on economic development subsidies.
In addition, Tim Bartik of the Upjohn Institute has a series of thoughtful tweets commenting on our article. His one reservation with the EU approach appears to be that even with the scaling down of the maximum subsidy allowed for large projects, the amount allowable might still be too

Amazon defeated in New York UPDATED

In the biggest ever defeat for a subsidized project in history, Amazon announcedFebruary 14th that it was canceling its planned half of HQ2 for New York City, which was to receive subsidies worth at least $3.133 billion. After facing months of public opposition, the company provided a Valentine’s Day present in the form of capitulation. Amazon showed that, like Electrolux, its efforts to extract maximum subsidies from 238 cities constituted corporate rent-seeking on a grand scale. Not only did Amazon conduct an exploitative public auction for the supposedly single HQ2 facility, it furthered the impression that it was engaging in rent-seeking by its refusal to discuss alternatives with New York officials, by its

Amazon defeated in New York; more to come

In the biggest ever defeat for a subsidized project in history, Amazon announcedyesterday that it was canceling its planned half of HQ2 for New York City, which was to receive subsidies worth at least $3.133 billion. After facing months of public opposition, the company provided a Valentine’s Day present in the form of capitulation. Amazon showed that, like Electrolux, its efforts to extract maximum subsidies from 238 cities constituted corporate rent-seeking on a grand scale.
Moreover, as Richard Florida reports at Citylab, the victory has also energized reformers around the country searching for a solution to the problem of corporate bidding wars. I myself have received inquiries from multiple elected

Electrolux closing Memphis plant; Economic development malpractice leaves Tennesse holding the bag

On January 31, Electrolux announced (h/t Alan Freeman, ipolitics.ca) that it would be closing its new (2012) factory in Memphis, Tennessee, by the end of 2020. This facility, you may recall, was a subsidized relocation from L’Assomption, Quebec (a Montreal suburb) that had an aid intensity of at least 99%! Yes, Tennessee state and local governments gave Electrolux a free factory ($188.3 million at present value in subsidies) while allowing it to get rid of its union, cut 60 jobs, and save over $4 per hour in wages on the jobs they kept.
As if all that weren’t bad enough, the state of Tennessee agreed not to put clawback provisions into the contract with

UPDATE: Foxconn now says that it will indeed still build a factory, citing a conversation between CEO Terry Gou and Trump (h/t commenter Joel at Angry Bear). This is certainly clear as mud. As others have pointed out, several promised investments from Foxconn have failed to materialize at anywhere near the scale promised, including in Brazil, Pennsylvania, Indonesia, Vietnam, and India. So I am going to remain skeptical on what was a terrible deal in the first place.

Original AB post Foxconn is flailng in Wisonsin. Post on Wisconsin and Foxconn in 2017 Foxconn cashes in.

Foxconn is flailing in Wisconsin (Insert your joke here.)
 In what may end up as the biggest economic development failure in U.S. history, Foxconn announced Wednesday that its $10 billion Wisconsin factory will not be a factory. Instead, the company says, it will still create 13,000 jobs, but these will be research jobs rather than manufacturing ones. I’ll believe it when I see it.

Accompanied by an almost $4.8 billion subsidy package as estimated by Good Jobs First (follow the link to the spreadsheet), the project was heavily criticized even before it was announced in 2017 (my take here and here). The massive subsidy helped normalize the idea of multi-billion investment incentives and gave Amazon a handy benchmark for its own effort to break the bank.

New article on tax increment financing in Missouri shows impact of KS/MO border war

After several years of work, my colleague Susan G. Mason (Boise State University) and I have published a new article on TIF in Missouri, specifically in the St. Louis and Kansas City metropolitan areas. “Exploring Patterns of Tax Increment Financing Use and Structural Explanations in Missouri’s Major Metropolitan Regions” appeared in the July 2018 edition of the HUD journal Cityscape, downloadable for free here. We omitted the two cities from our earlier statistical analysis (in the paywalled Economic Development Quarterly, May 2010) because they are much larger than any other Missouri city and use TIF far more than any of them, making them statistical outliers.
In our

Shock EU Court Decision Strikes Blow Against Investment Arbitration

With all the dreary news we’ve seen this week, could you stand some good news? The battle against investor-state dispute settlement (ISDS) got a huge boost in March when the Court of Justice of the European Union (CJEU) ruled in Slovak Republic v. Achmea B.V. (“Achmea”) that ISDS is contrary to EU law. The decision was something of a surprise because the preliminary analysis (“opinion,” in EU-speak) of Advocate General* Melchior Wathelet had suggested that the CJEU rule that ISDS is consistent with EU law.
As you may recall from the Trans-Pacific Partnership negotiations, ISDS is private arbitration of investment disputes between governments and foreign investors. Completely untethered

Great new Tax Justice Network podcast on how “Bean Counters…Broke Capitalism”

The June 28 Taxcast is out with a focus on the Big Four accounting firms. Richard Brooks is the author of Bean Counters: The triumph of the accountants and how they broke capitalism (order here in the UK and here in the US) which documents accountants’ involvement in some of the world’s worst financial scandals, not least of which is the promotion of tax havens. The new segment also features U.S. investigative journalist James Henry and Tax Justice Network Chair John Christensen. Additional stories include fraud at the Trump Foundation and why infamous US tax haven Delaware is supporting a financial transparency bill.
You can find the podcast and further reading here. Enjoy!

Amazon scores two more $5+ billion bids

A non-blogging friend points me to the announcement today of Maryland’s subsidy bidthat puts Montgomery County into one of the 20 finalist slots. Shockingly, Governor Larry Hogan (R-MD) put in a bid that would pay Amazon almost the entire cost of its facility, depending on what you think a proper discount rate should be now (hint: low).
“HQ2,” which Amazon has stated will amount to an eventual $5 billion in investment, will receive a subsidy package worth over $5 billion in nominal value (but not necessarily present value) from Maryland. The largest element in this package is a jobs tax credit of 5.75% of wages for up to 17 years, on salaries averaging $100,000 per year (minimum $60,000, maximum $500,000). According

Now Amazon wants to break the bank

On Thursday (October 19), the first stage of the Amazon sweepstakes for a second headquarters, dubbed “HQ2,” was completed as cities submitted their bids to the Internet giant. With a possible $5 billion investment and eventually 50,000 jobs at salaries over $100,000, this is one of the very best economic development projects to come along in a long time.
BUT IS IT?* I have a hard time understanding how this project even makes economic sense. Why does a company need two headquarters? Doesn’t that defeat the whole idea of having a headquarters as a centralized coordination site? Dean Barber has gone so far to suggest that Amazon will “A/B test” the two headquarters: See which one does better, and close the other one (h/t

Reports of Obamacare’s death are greatly exaggerated: All counties to be covered for 2018
Obamacare has now obtained an insurer for every county in the country, defying Republican claims that the program is collapsing. As reported by The Hill, “At one point or another over the past year, more than 80 counties have been at risk of having no ObamaCare insurer on the exchanges in 2018.” On Thursday (Aug. 24), the last “bare” county, in Ohio, was covered by insurer CareSource. Insurance companies have until September 27 to sign contracts, so it is not yet guaranteed there will be no bare counties for 2018.
As you no doubt remember, Chicken Little Republicans have proclaimed the sky to be falling ever since the Patient Protection and Affordable Care Act was

The already infamous case of Foxconn in Wisconsin illustrates a dynamic we are likely to witness more before we are rid of the illegitimate Trump regime. One of the regime’s hallmarks has been a set of unpredictable trade policies with a definite protectionist tilt. The United States was withdrawn from the Trans Pacific Partnership agreement on January 23. On May 19, the regime officially announced it would renegotiate the North American Free Trade Agreement (NAFTA).
If you’re a company dependent on exports to the United States, these are worrisome developments. Given that the country had $2.7 trillion in imports and an overall trade deficit of $502.3 billion in 2016, there are quite a few companies dependent on exporting to the United States. Therefore,

Foxconn hit the jackpot with Wisconsin on Wednesday, when CEO Terry Gou and Governor Scott Walker signed a memorandum of understanding for the company to invest $10 billion in southeastern Wisconsin in return for $3 billion in state subsidies and an undetermined amount of local incentives in the form of tax increment(al) financing (TIF).*
The basic outline of the deal, sent to me by John Haynes of the Milwaukee Journal-Sentinel, is pretty simple: Foxconn is required to invest $10 billion and employ 13,000 workers within six years at an average pay rate of $53,875 a year plus benefits. In return, the state will give Foxconn $1.5 billion in tax credits for the 13,000 new jobs, $1.35 in tax credits for the $10 billion investment, and $150 million in sales tax

Foxconn aims to break the bank
While the head of the illegitimate Trump regime makes multiple headlines telling the New York Times that he is above the law, we have to remember that there are plenty of other issues of concern to the middle class. One of the most striking is the latest huge bidding war for a gigantic Foxconn manufacturing plant (h/t David Haynes), slated to employ a massive 10,000 workers.
The linked article interviews an American consultant based in Beijing, Einar Tangen, who says that Foxconn’s standard procedure is to get as much incentives out of state and local governments as possible; indeed, he says, “You can expect Foxconn to get as close to zero cost as they can. They can do it because they bring so many jobs.” Yes — and no.
Yes,

Republicans help pass Illinois budget over Rauner’s veto
For the second time in as many months, legislative Republicans have turned on their Republican governor for his refusal to back tax increases to help balance the budget. Last month, supermajority Kansas Republicans revolted against Sam Brownback’s six-year tax-cutting experiment, which brought the state persistent budget problems and two credit downgrades.
Tonight (July 6) enough Republicans joined with the majority House Democrats to override Bruce Rauner’s veto of the Illinois budget (the Senate overrode on July 4 with one Republican vote), ending a two-year battle. Like Kansas, Illinois will now have tax increases, in this case on both the personal and corporate income tax, which are expected to raise

One consequence of electing the popular vote loser is that the official winners act as if they have a mandate for the most extreme version of their policies. Thus, we have proposed legislation, the misleadingly titled Better Care Reconciliation Act, that will not only roll back Obamacare’s expansion of Medicaid, but impose further large cuts on the program in addition. In total, the Medicaid cuts will come to $772 billion through 2026.
As a result primarily of ending the individual mandate, the Congressional Budget Office (CBO) estimates that 15 million fewer people will be insured in 2018 than would be the case with current law. As healthier people remove themselves from the individual market, this will cause increases in insurance premiums and the likelihood

Video series for “Rethinking Investment Incentives”
As regular readers will recall, I contributed to the Columbia Center for Sustainable Investment’s book, Rethinking Investment Incentives: Trends and Policy Options (Columbia University Press, 2016). Now, the editors have put together a series of video teasers for most of the individual chapters, all of which can be seen here.
As I wrote before, the book offers the perspectives of numerous experts in the field, and you can get quick overviews of the chapters from the teasers. These include the authors of chapters on theoretical analyses of location incentives; overviews of incentive use in the United States, the European Union, and the rest of the world; and control policies both subnational and supranational.

Kansas Republicans abandon Brownback; raise taxes over his veto
Remember Kansas’s great tax-cutting experiment under Governor Sam Brownback? (Me, sarcastic?) As always in Arthur Laffer and Stephen Moore La-La Land, cutting taxes leads to economic nirvana. Except when it doesn’t, and it didn’t in Kansas.
I recently wrote about the idiocy of Investor Business Daily‘s criticisms of California, and Paul Krugman carried the ball further, citing me and bringing in a comparison with Kansas (Brownback and Jerry Brown both took office in 2011). As Kansas cut taxes and California raised them, Kansas managed to raise employment by 5% from 2011 to 2017, whereas California’s job growth was a rather more impressive 15% over the same period. As it turns out, Kansas’s

A new article at consumerreports.org suggests that the Patient Protection and Affordable Care Act* (PPACA) played a substantial role in the decline of annual personal bankruptcies that we have seen since the high of 1.5 million in 2010.
As I showed several years ago, international bankruptcy data support the oft-heard claim that medical bills make up one of the biggest, if not the biggest, causes of personal bankruptcy. That is, if the United States has a bunch of medical bankruptcies and other countries don’t, all other things equal you would expect the U.S. to have a higher overall bankruptcy rate than other countries. And the only article I was able to find on this showed that it was true: In 2006, the U.S. had a rate (6000 per million population) that was

This isn’t actually news, but it’s news to me, and it’s something you need to know. Greg LeRoy sent me an article by James Meek in London Review of Books (20 April 2017) that he’d been sent by a friend, documenting more EU-permitted job piracy by Poland that preceded the case I discuss at length in my book, Investment Incentives and the Global Competition for Capital. There, I criticized the European Commission’s Directorate-General for Competition for approving a 54.5 million euro subsidy for Dell to move from Ireland to Poland in 2009. During my January 2011 book tour, I took a lot of flak from DG Competition when I presented there, with several staff pushing back on my criticism of this decision.
As the LRB article pointed out, this was another case involving Poland, where Cadbury received state aid of about $5 million (14.18 million zloty when the zloty was worth about 0.35 USD) in November 2008 to move from the Somerdale, United Kingdom, to Skarbimierz (the LRB gives a much bigger number, but from unspecified “Polish government figures,” so I cannot find a way to compare it with the EU’s case report). This case is only listed in the EU’s Official Journal, where it is reported as having been notified under the General Block Exemption Regulation.

I’ve discussed the Credit Suisse Global Wealth Reports before, an excellent source of data for both wealth and wealth inequality. The most recent edition, from November 2016, shows the United States getting wealthier, but steadily more unequal in wealth per adult and dropping from 25th to 27th in median wealth per adult since 2014. Moreover, on a global scale, it reports that the top 1% of wealth holders hold 50.8% of the world’s wealth (Report, p. 18).
One important point to bear in mind is that while the United States remains the fourth-highest country for wealth per adult (after Switzerland, Iceland, and Australia) at $344,692, its median wealth per adult has fallen to 27th in the world, down to $44,977. As I have pointed out before, the reason for this is much higher inequality in the U.S. In fact, the U.S. ratio of mean to median wealth per adult is 7.66:1, the highest of all rich countries by a long shot.
The tables below illustrate this. First, I will present the 29 countries with median wealth per adult over $40,000 per year, from largest to smallest. The second table also includes mean wealth per adult and the mean/median ratio, sorted by the inequality ratio.

1. Switzerland
 $244,002
2. Iceland
 $188,088
3. Australia
 $162,815
4. Belgium
 $154,815
5. New Zealand
 $135,755
6. Norway
 $135,012
7. Luxembourg
 $125,452
8. Japan
 $120,493
9.

We’ve gotten to another point where it’s hard for me to turn on the TV. I know this will have to change, but for now I’ll go back to one of my favorite topics, the fate of Ireland under austerity.
As I suggested might happen, Ireland in its 2015-2016 immigration statistical year (May-April) was finally able to end its net emigration. According to the Central Statistical Office’s August report, 3100 more people came to Ireland than left during 2015-2016. This was the first time since 2008-2009 that Ireland had net in-migration. Still, among the Irish themselves, net emigration continued in 2015-2016, with 10,700 more leaving than returning.
The unemployment rate declined again from Q3 2015 to Q3 2016, from from 9.3% to 8.0%. The monthly unemployment rate for January 2017 dropped to 7.1%. And yet…
While Q3 2016 employment increased by 57,500 to 2,040,500, this remains 5.6% below its Q1 2008 peak of 2,160,681. Things are finally getting better, but Ireland is still not all the way back.
By contrast, currency-devaluing, banker-jailing Iceland long ago passed its old employment peak (create your own table), which was 181,900 in August 2008. Employment reached a low point of 163,900 in February 2011, first surpassed the old peak in February 2015 (182,900), and in December 2016 stood at 194,400, or 6.9% above the pre-crisis peak.