By on July 5, 2012

The Fourth of July is upon those of us who wave Old Glory while eating some grilled chicken marinated in Ale-8-One, drinking some fine Kentucky bourbon (straight or as a mint julep), doing a burnout in our Corvettes, and setting off a bunch of firecrackers, sparklers and cherry bombs for our amusement.

Oh, and celebrating freedom from the British, too.

Speaking of Kentucky’s numerous industries, Governor Steve Beshear (D-KY) announced in a press release today his signing of a bill that would encourage job creation and heavy investments in the commonwealth’s automotive and parts industries. The bill, filed by Representative Larry Clark (D-Louisville), is an amendment to the 2007 Kentucky Jobs Retention Act. As a result of the amendment, auto manufacturers and those who make the parts for all of those Camrys, Corvettes and Escapes will have greater freedom in seeking incentives regardless of location in Kentucky, home of 440 automotive-related industries and 68,100 people, the third highest in the nation in terms of automotive-related employment as a percentage of overall employment.

“Given the success Kentucky has seen from the incentive package the General Assembly offered to Ford in 2007, it was only natural to extend this deal to the state’s other assembly plants and large auto parts suppliers,” said Rep. Clark. “My hope is that they will all take advantage of it the way Ford has, because it has the potential to generate thousands of new jobs and hundreds of millions of dollars of investment. Such a move would further solidify Kentucky’s already strong standing nationally and internationally in the automotive industry.”

The amendment will go into effect July 12th, and will not impact the state budget for the 2013-2014 fiscal year.

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16 Comments on “Amendment to Kentucky Jobs Retention Act to Encourage Investment, Job Creation in Commonwealth’s Auto Industry...”

  • avatar

    Translation. We’re going to give out buckets of corporate welfare to encourage businesses to come here, on the government dime, and avoid paying taxes.

    In turn they can pay borderline wages, because apparently that is now acceptable in the new America (UAW wrench turners on the Corvette excluded) and tax the bejesus out of the citizenry to make up the “budget shortfall” and to pay for those incentives.

    But that’s OK, because otherwise their wouldn’t be any jobs without government give aways (so goes the argument) without the taxpayer paid largess handed out.

    Blows my mind how corporate welfare has become good, but citizen welfare is evil.

    • 0 avatar

      We have the highest corporate tax rates in the world. Just because these companies get a tax break to build somewhere doesn’t mean they don’t pay a lot of taxes.

      The citizenery that is having the bejezus taxed out of them, in many cases pays no income taxes. That in and of itself isn’t too bad, but many of them turn a profit come tax time through the child tax credit and earned income credit. That I don’t agree with.

      But you are probably right, let’s cut companies no breaks at all. Then we can gripe when they move to countries with a lower tax rate.

      And did I miss something? Are the wrench turners at Ford’s Louisville Assembly plant non UAW now?

      Corporate welfare would be bad, but I don’t see that taking less of a company’s money than you were going to take as is the case here as being welfare. A situation like Solyndria, Farm Subsidies and some oil subsidies, sure, but this is not.

      • 0 avatar

        Ahhh the, “we pay the highest corporate tax in the world” argument trotted out. Yup – if you look at base rates and not the loopholes, tax credits and incentives.

        Oh and if we cut the taxes they’ll leave??? Is that why Europe and Asia are both ramping up factories here for the cheap labor, weak dollar, easier benefit laws and lower taxes? Or are the manufacturing business leaders of the world just blithering idiots???

      • 0 avatar

        “We have the highest corporate tax rates in the world.”

        – Yeah, that’s an all too common saying done by those who have little knowledge of the corporate world – parroting the good job that the Chamber of Commerce, MSNBC and Fox News do in spreading the big business agenda.

        The EFFECTIVE tax rate is pretty low compared to the rest of the world with many big corporations paying little or no tax (or even getting a REFUND).

        Here’s an example, Chesapeake Energy has made $5.5 BILLION in pre-tax profits since its founding 2 decades ago and has only paid $53 million in tax over that time period.

        In 2008, Chesapeake’s CEO, received $116.89 million in compensation – more than TWICE what Chesapeake has paid total in taxes over 23 years.

    • 0 avatar
      Jonathan H.

      I love it when people try and make the argument that a reduction in taxes is a “loss” to government as if government were a business and this was money they were entitled to somehow. A tax not levied is not a government expenditure or loss. Reducing the operational burden to a company like Toyota that directly employs nearly 10k people and thousands more indirectly in KY seems like smart governing. Actually handing over piles of cash(say, half a billion to Solyndra)is corporate welfare. This is not.

  • avatar

    Socialism: An economic theory or system in which the means of production, distribution, and exchange are owned by the community collectively, usually through the state. (Quoted from the Free Dictionary)

    I am extremely concerned about the direction our government (From our President on down) is taking us in. This country was founded upon Capitalism and the Free Enterprise System. Our Founders never intended for the government to use taxpayer’s dollars to buy companies (GM, Chrysler, numerous banks) and to appoint government Czars to run the companies.

    I hope and pray we have a change in our leadership this fall. If not, where and how will it stop?

    • 0 avatar

      Ditto. Funny how the government (and many citizens) think government can create jobs. They can only get out of the way of the people (mostly small business owners) that do the job creating.

      Anyway, the Corvette factory in KY is pretty cool. Worth a visit!

    • 0 avatar

      Uhh, it was “free enterprise system’/free market capitalism (underregulated) which resulted in the finance sector to engage in risky behavior, if not malfeasance – which then ended up requiring the US taxpayer to bailout those that were “too big to fail” (but the CEOs and other top execs still made off with their ill-gotten gains).

      So the system we have now is privatized profits and socialized losses (which btw, was primarily done under the Bush regime).

      And Germany is a much more “socialized” country/economy than the US, but they are just humming along fine (in fact, they can’t find enough highly skilled workers like engineers); but they have much tighter regulatons on their finance/banking sector and their companies produce high quality goods manufactured in Germany that are in demand around the world.

      • 0 avatar

        I’ll bet the Germans will never coerce financial institutions to make mortgage loans to people who have no chance of paying them back. For that you can thank Clinton’s modifications to the CRA in the 90’s. The coercion came complete with the threat of criminal charges if they didn’t pony up loans in areas that were previously redlined for sound economic reasons. After a while what would have been malfeasance before the mid 90’s became SOP. And you can thank Phil Graham for leading the way to repeal Glass-Stegall. And you can thank Barney Frank and Chris Dodd – friends of Countrywide’s Angelo – for defending the outrageous activities of Freddie and Fannie. And you can thank Bush for not going over their heads to the American people to highlight that behavior. And you can thank all of official DC for not shutting down the insane derivatives market – at its extremes, it looks like the bucket shops in the 1920’s. I’m reminded of P J O’Rourke’s observation that when buying and selling is regulated, the first thing bought is politicians.
        If you don’t like privatized profits and socialized losses, vote no on incumbents. And let them know why.

      • 0 avatar

        “I’ll bet the Germans will never coerce financial institutions to make mortgage loans to people who have no chance of paying them back. For that you can thank Clinton’s modifications to the CRA in the 90′s.”

        – That’s a bit of a bogus claim as to beign the cause of the subprime bubble and crash.

        The whole subrprime mess was due to Wall Street bundling and “securitizing” mortgages and selling them to investors as “safe investments” (Wall St., you know had to move on to another legal Ponzi scheme after the whole bubble/crash).

        With Wall St. buying up mortgages left and right, the big commerical banks and mortgage giants like CountryWide had zero incentive to do the proper due diligence when it came the borrower and lending amounts.

        The faster they could write up the mortgages and the bigger amounts the mortgages were for – meant more profits for both the banks/mortgage giants and fatter compensation packages for the CEOs.

        That’s why the banks often didn’t even bother completing all the proper paperwork (which is why banks ended up hiring 3rd parties to “reconsitute” the paperwork – signing the name of one “banking exec” on hundreds of thousands of documents) or vene engaged in outright fraud (filling in income amounts that were false and significantly higher than actuality).

        Complicit in all of this were the rating agencies like S&P/Moody’s which gave these mortgage backed securities AAA ratings.

        But simply offering mortgage-backed securities as “safe investments” to investors was hardly the end-game, Wall St. knew the RE market was artifically overheated and they, along with hedge funds like Magnetar Capital, would BET against them (after they got investors to sink more $$ into them).

        This is the type of financial shenanigans that Germany doesn’t allow its banking/finance sector to engage in (same goes for Canada).

        Otoh, Britain, Iceland and a few others allowed their banking/finance system to engage in the same type of “financial engineering” and they have all paid the price (Britain has entered into a double-dip recession and Iceland basically went bankrupt).

        It’s no coincidence that the housing bubble was concentrated in areas like Arizona, Southern Cal, Florida, Nevada, etc. (you can’t tell me that people who had “little chance of paying mortgages” were concentrated in those areas; that’s just the areas where the big banks concentrated since those areas had the fastest rising RE prices due to speculators, etc.).

        Small regional/local banks did not engage in those type of shenanigans for the most part.

        And speaking of Phil Gramm – not only was he instrumental in the repeal of Glass Steagall, he was also the lead in keeping financial derivatives unregulated – of which one provision was known as the “Enron Loophole.”

        No coincidence that his wife, Wendy, was the former head of the CFTC and later served on the Board of Enron.

        So the subprime/derivatives debacle, Enron manipulating California’s energy market, high gas prices due to the immense of amount of speculative $$ flowing into oil futures – all have the hand imprint of Phil Gramm (who is incidentally living the highlife as a Vice Chairman of Swiss banking giant, UBS).

      • 0 avatar

        bd2 – I don’t disagree with much of what you say. But many avalanches start small and the coercive threats in the CRA as modified in the 90s led to some wild and crazy lending. The NINJA (no income, no job, no assets) mortgages were made to people without a prayer of repaying the debt. Ultimately, many were left worse off than before, good intentions be damned. It changed the rules for mortgage lending in a wider sense and facilitated the altA/liar loans that really screwed us up. The banks knew these mortgages were crap and unloaded them. I didn’t suggest that the CRA was the sole cause. When the book is written on this, there will be a cast of thousands of scoundrels and hustlers in government, lobbying and the financial industry. Playing pin the tail on a specific donkey – or elephant – is an unhelpful exercise.

  • avatar

    Priority one for a state government, particularly when overall economic conditions are as distressed as they are, is to create conditions amenable to private sector job creation. The unemployed still have a vote, and being unemployed they tend to have a negative attitude towards those in power.

    APAGttH, you apparently feel that KY’s program should be to hold out for good closed-shop UAW tier 1 jobs, in a heavily taxed manufacturing plant. At least then they would provide a partner for the state of Michigan to play checkers with while waiting for what’s never-gonna-happen.

    Unused land or facilities pay little if any taxes. By offering tax concessions on those properties if used for an economic activity, how does that create a “budget shortfall” that has to be made up by taxpayers? They are spending no money, yet you are assuming that somebody’s taxes need to go up to replace income they never had in the first place. Meanwhile you have additional workers walking around with paychecks, paying additional income and sales taxes while generating economic activity.

    What blows my mind is how this gets condemned as corporate welfare (Bad!) and somehow inferior to government welfare as defined by bloated public sector benefits, bailouts, preferential bankruptcies, and direct benefit payments (Good!)

  • avatar

    Nothing wrong with these tax breaks “IF” they come with strings attached.

    Like X jobs at a site for Y years or else. If the company that gets the break is an established player it can usually work out. Someone like Curt Schilling in Rhode Island and the $75 million loan guarantee not so much.

    One of the problems with tax breaks for so many years is many companies hold the jobs hostage at the end the tax break period.

    • 0 avatar

      The RI loan guarantee to Schilling’s company was around $125 million, if the news orgs are right (sometimes a dubious assumption). There is a world of difference between a loan guarantee for a MP role playing game with very low probability of success and a very high payoff versus automotive factories/suppliers. The former is like betting your life savings on a spin of the roulette wheel. The latter is a much more cautious arrangement. An example where RI did something sensible is the painfully slow infrastructure development at Quonset Point. It has become the 5th largest car import port in the East. VAG and Porsche use it for the Northeast. Deep water docking, I95 access via highway, double height rail car access and a 9000 ft runway at the old NAS. The place should be packed and isn’t due in large part to the disincentives of one of the worst state tax climates in the country.

  • avatar
    el scotto

    Tax incentives for companies to start up or relocate or even stay are here to stay. You have two options: 1. Deal With It. 2. Vote the rascals out. The ugly realities are: Companies will do what is best for them, Politicians will do whatever makes them look good/get reelected. I think most of us find the double barrel shotgun of greed and avarice disgusting.

  • avatar
    el scotto

    Oh, and it’s “Lew-ah-vill”.

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