When an Illinois company, for example, moves to Indiana because of high tax rates or other business climate concerns, most consider that a good thing. When Missouri and Kansas battle over Kansas City area organizations, some businesses view it as wasteful spending on tax incentives. Governing reports:
Seventeen prominent business leaders, including top officials with Hallmark and Sprint Nextel, recently wrote a letter to the governors of Kansas and Missouri, asking them to put an end to the “economic border war.”
“Because of our unique bi-state community, too often these incentives are being used to shuffle existing business back and forth across the state line with no net economic benefit or new jobs to the community as a whole,” the business leaders wrote.
The fact that the business community has come out against this practice hasn’t moved politicians to stop devoting scarce tax dollars to it. Kansas Gov. Sam Brownback denies that his state is “poaching” companies and is unapologetic about seeking new employers wherever they may be found, including just over the border in Missouri.
Sly James, the new mayor of Kansas City, Mo., says it’s time his city makes a move. His predecessor, Mark Funkhouser, was opposed to using tax incentives to lure businesses. (Funkhouser is a Governing contributor.) That opposition, James argues, handed Kansas an advantage. “The days of sitting back and watching it happen are over,” James told reporters at an economic development event. “Mutually assured destruction only works if both sides are armed.”
But some residents agree that their region should be presenting a united front. When a company’s interested in relocating, says Jeff Kaczmarek, the president of the Greater Kansas City Chamber of Commerce, there’s a “well worked out protocol” for banding together. If a company is moving in from Seattle or Denver, there’s no squabbling about which jurisdiction is going to try to lure it. “Everybody agrees that the best approach is a regional approach,” Kaczmarek says.
It’s only when a company is already established in the area that the bidding wars take place, it seems. “Money that goes to bribing some company to move 10 miles across some obsolete political border is money wasted,” says Richard C. Longworth, author of a book about heartland economics in the global era.
It may happen everywhere, but the practice of throwing tax dollars at companies has become so prevalent around Kansas City that it has, in fact, generated some new business. Realtors are benefiting by helping companies find short-term leases, which have become fashionable because businesses know they may be moving in the near future to take advantage of new incentives.