Bloomington City Council has approved a $2.45 million tax break for Catalent, the New Jersey-based pharmaceutical corporation that bought Cook Pharmica in 2017, in exchange for Catalent expanding its local facilities to create 200 additional jobs.
It’s possible this tax break will help Bloomington in the long-term by the substantial employment opportunities the community will gain. However, it’s part of a larger national trend that’s helping American corporations get away with paying absurdly little in taxes.
Local governments in the United States are in a desperate competition with each other to attract jobs to their cities. In order to do so, they’re offering corporations cushy tax abatements and other benefits.
When it works, the lucky city often does benefit. The opening of a new warehouse or manufacturing plant can revitalize a town’s economy.
Ultimately, though, the big winners in this scenario are the corporations. In the process of attracting them, cities are slashing their already-too-low tax rates even further.
That $2.45 million in tax relief for Catalent will be $2.45 million in potential revenue that the city is losing. We need that revenue to fund important government programs.
Furthermore, this inter-city tax break competition seriously disadvantages small businesses. Only large corporations can provide employment opportunities significant enough to entice local governments to award these massive tax breaks. It’s the companies with the least need for tax relief that get it most often.
The biggest recent example of this phenomenon was the elaborate and drawn-out contest among cities hoping to be the site of Amazon’s second headquarters. Cities across the country bent over backward to give massive benefits to a corporation that is already one of the most profitable on Earth.
Amazon ultimately announced Long Island City, New York, and Arlington County, Virginia, as the locations of two new facilities, only to reverse the decision to build the New York campus this week. In order to win the contest in the first place, the two cities had to offer Amazon a combined $3.4 billion in tax incentives and grants.
Amazon pulled out of the planned New York location due to the considerable local backlash driven by fears of gentrification and anger at the unfair benefits given to the company, such as being granted an exception to New York City’s ban on rooftop helipads.
New Yorkers’ protests show Americans are starting to recognize the unfairness of these sweetheart tax deals more and more. But as long as American cities retain the ability and incentive to lure corporations with these deals, they will.
That’s why we need national legislation to end this phenomenon. Congress should pass a bill prohibiting cities from offering tax incentives to specific corporations as a way of attracting them. Only federal action can level the playing field nationwide and force U.S. corporations to pay communities the bare minimum of what they owe.
Bloomington’s incentives for Catalent may or may not be worth the 200 jobs they’re meant to provide, but it would be best if this deal weren’t an option in the first place.