Forging a different path
Countering the status quo
There is a frequent complaint amongst those who advocate for a stop to the tax incentive game, along with those pushing for an overhaul of California’s inadequate revenue system: not only are elected officials reluctant to act on these problems, they are generally unwilling to even speak about them.
It may seem obvious, but that silence reinforces the public sense that the status quo represents the right path — that there aren’t any downsides to the present way of doing things, nor any practical alternatives. The silence heightens this impression all the more when contrasted with the same politicians’ practice of claiming that a strategy focused on maximizing new corporate investment will yield rewards for local residents.
Sam Liccardo, a San Jose city councilmember who is also running for mayor, offered a characteristic view. While Liccardo has strongly supported the mayor’s efforts to cut worker pensions, he also agrees that the city does not bring in enough revenue. He would thus, in principle, like to see the tax structure reformed in some way — yet this simply isn’t something that is talked about.
Liccardo said that it is remarkably uncommon for local officials in California to engage in discussions about the way the state’s revenue system leaves their cities with inadequate resources. Asked whether such a discussion, especially coming from many local officials at once, might be a first step toward changing the boundaries of public debate, Liccardo was dubious: “I’m not sure it changes the dynamic any.” He, like other officials, also pointed to the fact that most levers for structural reform exist beyond the local level; since these issues are “legislatively out of [his] hands,” decrying the state’s revenue system and the interstate race to the bottom, even though he objects to both systems, thus falls low on his list of priorities.
Peter Fisher is research director of the Iowa Policy Project, and a longtime critic of how municipalities play the incentive game. He sees public officials speaking out against the status quo as a necessary element of creating a broader public debate and of considering alternative practices. “I spoke up at a public meeting about this — there were several hundred people there. And somebody came up to me and said that’s the first time they ever heard anybody say that maybe incentives aren’t effective…You are drowned out unless there are some people with more visibility making those arguments.”
LeRoy of Good Jobs First described a part of the problem as “anxious politicians trying to look aggressive on the economy in a time of prolonged high unemployment.” Many such officials, LeRoy said, “feel trapped in a game whose rules they never would have written. They sort of feel like they’ve got to do it because everybody else is doing it. But they don’t like it, and they understand how distorted their perspective has been by the way the game plays out from their side of the table before the conversation even happens.”
LeRoy, however, did cite one recent counterexample. Michael J. Madigan, the speaker of the Illinois House of Representatives, issued a written statement in December with an unexpected diatribe against corporate giveaways. Madigan was “channeling enormous public anger…from small business owners and working families who are making the connection between loose corporate giveaways on the one hand and higher taxes and declining public services on the other,” LeRoy wrote in an email. When this happens, “it means politicians have figured out that defending the old way of doing things has a higher political cost than groping for Plan B.”
The importance of engendering a broader debate
There are no signs that Madigan’s action has yet had the effect of helping other officials around the country find their long-misplaced backbones. That’s true even though Fisher pointed out that a politician wouldn’t have to step up and say, “We’re going to stop doing this altogether.” Instead, Fisher said, we “just need people to say, ‘We’re going to be a lot smarter about how we do this, and we need to be much tougher negotiators and not give away the store and start scrutinizing these deals and developing some criteria.’”
Were a critique like Madigan’s echoed broadly in California, that would quite possibly open up avenues for the kinds of substantial change required to address the immediate needs of a city like San Jose. Chief among them is the state’s Proposition 13–based tax structure, whereby enormous corporations pay decades-old rates for their commercial lands. It is precisely such change that local officials like Liccardo are unwilling to demand for fear of losing business to places like Texas.
One important obstacle to such reform is the fear that the business community invariably stokes to prevent any serious debate, said Lenny Goldberg, director of the California Tax Reform Association. “The business guys, when they talk to me and my allies, they say, ‘Just so you know, that’s nuclear war,’” Goldberg said. “I take seriously that choice of words. A nuclear war is unthinkable. You can’t do anything to provoke a nuclear war. That means you can’t have a discussion.”
Not having the discussion means that structural reforms remain unpursued and that subsidies and incentives continue unabated. It means, said Peter Fisher, that people won’t “realize it’s things like investments in quality education and quality of life…that is going to make the most difference in the long run. You are undercutting your ability to do that when you underfund the public sector because you’ve given all the tax revenue away to get jobs.”
And it means that even more fundamental questions don’t get asked. For example, said Fisher, it would be a “healthy view” to recognize that a region can prosper even if it isn’t a growth machine. “Why do we need to grow rapidly?” he asked rhetorically. “Why wouldn’t we be better off just making life better for the people that are here now?”
The current practice of providing incentives reflexively, important in and of itself, is also a signal of a deeper compliance. “The money winds up standing in for how accommodating the bureaucracy is going to be,” said Nari Rhee, the urbanist and labor scholar formerly at the University of California, Berkeley. This, in turn, is an expression of the notion that local governments are duty-bound to cater to the needs of the corporate sector. “That notion is so generalized and insidious,” Rhee said. “Everyone seems to have internalized that this is the way it works.”
Read the introduction (“Left behind: San Jose and the broken promises of the neoliberal era”)
Read Part 1 (“Deep-rooted dysfunction”)
Read Part 2 (“The delusions of an American Technopolis”)
Read Part 3 (“This valley is their valley”)