Annals of corporate welfare | Arkansas Blog

Tuesday, December 2, 2008

Annals of corporate welfare

Posted By on Tue, Dec 2, 2008 at 4:29 PM

Speaking of Under the Dome, it reports today on a $30 million incentive being offered by Mississippi to keep a Cooper Tire plant operating in that state. Mississippi will pay roughly $25,000 per employee to keep the plant open.

Cooper is likely to close one of four U.S. plants and a plant in Texarkana is among those on the line, which explains Rep. Steve Harrelson's interest. He authors Under the Dome.

Suppose Arkansas offered a comparable $35 million to keep the 1,400-employee Texarkana plant open. It's just about impossible to foresee that the state would ever get its money back. Workers in Texarkana don't pay the state income tax. The sales tax that is assessed there doesn't begin to offset that loss. Plus, Texarkana officials are complaining now that everybody shops in Texas anyway on account of a lack of a tax on groceries in Texas and want to be able to drop local sales taxes on food.

But just suppose all the workers did live in a county where they had to pay the state income tax, say an effective rate of 4 percent on a $40,000 annual wage, or $1,600 a year. (And that's a generous estimate.) It would take 15 years of income taxes from all 1,400 employees to recover a subsidy equivalent to what Mississippi is offering. But many if not most of the workers don't pay an Arkansas income tax and they do a lot of their shopping in Texas. Perhaps Texas would like to kick in to keep the plant open.

Like Harrelson, I'll be interested to see how this shakes out. Or, more precisely, to see what Cooper Tire can shake down.

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