Banning Public Subsidies for Big Retailers

Date: 1 Dec 2008 | posted in: Retail | 0 Facebooktwitterredditmail

Over the last twenty years, cities and counties have provided massive public subsidies to finance the construction of big-box stores, shopping malls, and most recently, Amazon warehouses.

These subsidies take different forms — property tax exemptions, sales tax rebates, job tax credits, tax increment financing (TIF), and so on.  While most states do not keep a central record of every municipal and county development incentive, Good Jobs First, a nonprofit research group that tracks these deals, estimates that large retailers have received at least several billion dollars since the late 1990s. Walmart alone has pocketed over $1 billion in municipal, county, and state giveaways to help fund its growth.

These subsidies distort competition and undermine locally owned businesses, which are rarely given any sort of tax break or special deal. Instead, they often see their tax dollars used to subsidize their biggest competitors.

Government officials often justify these deals on the basis of job creation and economic growth, but studies indicate that subsidizing retail development does more economic harm than good.

In 2011, for example, a consortium of local governments in the St. Louis metro area published a study in which they reported that cities and counties in the region had diverted more than $5.8 billion in public tax dollars to finance private development. More than 80 percent of these funds supported the construction of new chain stores and shopping centers. Yet the region saw virtually no economic growth. “The number of retail jobs has increased only slightly and, in real dollars, retail sales per capita have not increased in years,” the authors of the study wrote, noting that many of the region’s municipalities are now broke. According to the study, more than 600 small retailers have closed in the St. Louis metro area. The resulting job losses have offset the job gains from the new development.

Below, in the Rules section, we have included a policy example from Arizona, where a state law now prohibits the use of tax incentives to fund retail development projects in the greater Phoenix region, as well as detailed information on reforming tax increment financing (TIF), a very common way that cities subsidize sprawling retail development at the expense of older neighborhoods and independent businesses.

More resources on subsidies:

  • Good Jobs First — This national nonprofit organization has produced extensive resources to help grassroots organizations and policymakers ensure that economic development subsidies are accountable and effective.

 

More resources on subsidies for Amazon:

 

More resources on subsidies for big-box stores:

  • Walmart Subsidy Watch — A service of Good Jobs First, this site enables users to search a database of Walmart subsidies. Find out how much public funding the retailer has picked up in your state.
  • Big Tax Breaks for Big Boxes” —  A  detailed article on how subsidies tilt the playing field against independent businesses, from the Syracuse Post-Standard, April 1, 2007

Rules

Ban on Tax Incentives for Retail Development – Arizona

In July 2007, Arizona adopted the following law, which bars municipalities in the Phoenix metropolitan region from providing tax breaks or incentives to retail development. … Read More

Reforming Tax Increment Financing (TIF)

When used to off-set the high costs of redeveloping blighted sites in poor neighborhoods, tax increment financing (TIF) can be an effective economic development tool. However, all too often, cities are using TIF to underwrite projects in affluent areas, to subsidize construction on undeveloped land, and to finance big-box retail. A growing number of states are considering legislation to reform TIF. … Read More
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Stacy Mitchell

Stacy Mitchell is co-director of the Institute for Local Self-Reliance, and directs its Independent Business Initiative, which partners with a wide range of allies to implement policies that counter concentrated power and strengthen local economies.