Think Tank: Tax Incentives Hurt Small Business Owners in Tennessee

small business

Tennessee’s economy would thrive even without local and state governments dishing out tax incentives to already wealthy corporations.

What’s more, these tax incentives penalize Tennessee’s small business owners.

This from the spokesman for the Nashville-based free market think tank The Beacon Center of Tennessee.

“Simply put, corporate handouts benefit rich millionaires at the expense of small business owners and taxpayers,” said Beacon spokesman Mark Cunningham.

Cunningham cited an original documentary Beacon released last year. That documentary, titled “Rigged,” was about what the think tank described as the malignant effects of crony capitalism in Tennessee.

Under crony capitalism, there are mutually advantageous relationships between government officials and certain people in business. This happens often at the expense of other business owners. This also often gives certain business owners an upper hand over his or her competitors.

The “Rigged” documentary featured two Memphis furniture store owners who had to compete against the city’s new IKEA store, which got tens of millions of dollars from the city government.

“What ended up happening was that one of those business owners has since gone out of business,” Cunningham said.

“Everyone can look at this practice and say ‘This is not fair. This is not what capitalism is. This is not the free market at work.’ Instead, it’s the opposite, where the government is picking winners and losers. We don’t think that’s fair.”

Scott Harrison, spokesman for the Tennessee Department of Economic and Community Development, which hands out incentives at the state level, said “tax credits encourage investment, job creation and wage growth.”

“These statutory tax credits, together with TNECD’s FastTrack grant program, are the state’s primary financial incentives for recruiting new businesses to Tennessee, assisting the expansion of existing companies and attracting high quality, family wage jobs for Tennesseans,” Harrison said in a statement.

Harrison we5t on to say the government’s financial incentives make Tennessee globally competitive with neighboring Southeastern states when recruiting new jobs and industry.

“Since 2011, TNECD has secured $33.2 billion in private capital investment and more than 166,000 job commitments across Tennessee,” Harrison said.

“Because of Tennessee’s business-friendly environment, the state’s economy has reached record levels of output and sustained historic low rates of unemployment for the past year.”

Cunningham, though, said the state’s economy could get by just fine without these incentives.

“I think things would probably be the same or better,” Cunningham said, adding the state ends up losing money on these deals.

“Some companies come here. At some point, they hold the state hostage and say they’ll leave if they don’t get more money.”

The producers of the now cancelled television series “Nashville” threatened to move production to Texas if the state government didn’t give them more money, Cunningham said.

ECD officials announced in 2012 that state taxpayers would pay GM more than $1 million to help the company expand its production plant in Spring Hill. The announcement came after GM began to double the amount of money it paid two lobbyists to work with Tennessee officials.

In addition to the $1 million ECD grant, GM lobbied for and received a $17 million job-training grant from the same agency in 2009.

As Tennessee Watchdog reported, state officials expected the grant money would help GM train thousands of Tennessee residents for long-term jobs in Spring Hill. Despite the taxpayer-funded grant, GM relocated those jobs to a plant in Michigan.

Seven years ago, state officials gave away $100 million so Electrolux would set up shop in Memphis, with city and county officials adding on an additional $20 million each.

Memphis officials, meanwhile, spent at least $30 million to convert the long-troubled Memphis Pyramid into a Bass Pro Shops resort. That money came from taxes on hotels, motels, and car rentals.

“Ultimately, we at the Beacon Center believe businesses should succeed or fail based on what they provide consumers and not who they know in government,” Cunningham said.

“We want to go back to a truly free market system where every business has a chance to succeed without government playing favorites.”

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Chris Butler is an investigative journalist at The Tennessee Star. Follow Chris on Facebook. Email tips to [email protected] 






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