Marriott: corporate schoolyard bully

[Robert Weissman <rob@essential.org>]

Call Marriott the latest in a long line of corporate schoolyard bullies.
	
The hotel chain in March exacted an enormous tax and road improvement
subsidy from the state of Maryland and Maryland's Montgomery County, in
exchange for a promise to do I nothing.
	
Actually, the company promised to proceed with existing plans to hire 700
new workers at the headquarters and not to move its headquarters out of
Montgomery County (just north of Washington, D.C.) and across the border
into Virginia. 
	
If the company chooses to expand its current headquarters, the value of
the Maryland package will be $31.68 million over 19 years. If the company
builds a new headquarters, the value of the Maryland gift will rise to up
to $44.17 million.
	
Maryland offered Marriott the giveaway for one reason: it feared the
company would jump to low-tax haven Virginia -- an impression stoked both
by Virginia and the hotel company. Current Governor James Gilmore III and
former Virginia Governor George Allen both tried to seduce company chair
Bill Marriott to border hop. 

Faced with Virginia's enticements, and with Marriott playing coy about its
final decision, Maryland progressively elevated its offer to the hotel
company.
	
When Marriott announced that it would stay in Maryland, state officials
celebrated their victory over their neighbor. 
	
"Our team is red hot, Virginia's team is all shot," Maryland House Speaker
Casper Taylor, a Democrat, told the Washington Post.
	
But in the bidding war that Marriott forced between Maryland and Virginia,
there was only one true winner: Marriott.
	
The state and county subsidies that Marriott extracted from Maryland
constitute one of the worst and most indefensible kinds of corporate
welfare. 
	
Because such a high percentage of state and local property taxes are
allocated to schools, tax abatements of the sort showered on Marriott
frequently come at the expense of school funding. Some states wall off
school funding from tax abatements -- meaning the burden is instead
shifted directly to other taxpayers to make up the lost income.

And there is not even the pretense that Maryland-style giveaways create or
preserve jobs. Based on company growth, profitability and needs, for
example, Marriott had determined to expand its headquarters, irrespective
of whether it would receive tax breaks from the headquarter's home state. 

Not even proponents of the giveaway deal can rationalize the subsidy on
the grounds that it created jobs that would not otherwise have been
created -- the best they can argue is that they are in Maryland, rather
than somewhere else. While Maryland officials can therefore attempt to
justify the tax abatements on the grounds that they preserved Maryland
jobs, from a broader social point of view it is clear this kind of
giveaway is a direct transfer from taxpayers or schools to the company
with no reciprocal benefits.
	
Unfortunately, Marriott's corporate blackmail of Maryland is now the norm
in corporate location decisions. These threats are "rampant" and "business
as usual," says Greg LeRoy of Good Jobs First, a Washington, D.C. advocacy
group working to promote accountability among corporations receiving job
subsidies.

In many cities and states, virtually no major building is built, no large
corporate headquarters lease renewed, no Fortune 500 factory opened,
without a slew of tax breaks and related subsidies. The most outrageous
example, says LeRoy, is the New York City gift to the New York Stock
Exchange -- a subsidy of $600 million to $900 million to keep the Exchange
from migrating to New Jersey. And each giveaway sets the stage for
additional subsidy demands from other large employers.
	
Similar largesse is rarely bestowed on small business owners, raising the
question of why the Big Boys can't pay their fair share, as the little
guys do.
	
Frequently, company threats to move are a bluff. Decisions on where to
locate major facilities are generally made based on transportation costs,
company history, access to suppliers and other factors that override state
and local tax costs. But often enough the threats are real, especially if
the choice is between nearby locations.
	
And it is very difficult for cities and states to know when companies'
threats are empty. "It is easy to create a credible appearance" of an
intent to move, says LeRoy, and plenty of consultants are ready to present
analyses to the public on how a company can save money by locating
elsewhere.
	
The plausibility of the threat notwithstanding, local and state officials
that have the backbone to stand up to corporate bullies can often win. If
they are going to back down and offer subsidies, LeRoy advises at least
demanding contractual guarantees that promised jobs will be created and
retained.
	
An ultimate solution to the problem of corporate mobility will require
aggressive national action. Representative David Minge, D-Minnesota, has
proposed a federal excise tax on companies receiving state and local tax
breaks -- a good first step to take back some of the lunch money that the
corporate schoolyard bullies steal from intimidated states, counties and
towns.

Russell Mokhiber is editor of the Washington, D.C.-based Corporate Crime
Reporter. Robert Weissman is editor of the Washington, D.C.-based
Multinational Monitor.

) Russell Mokhiber and Robert Weissman

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