Enterprise zones are just corporate welfare

By Willie L. Pelote Sr.

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Chambers of commerce and other free-market ideologues routinely claim that ending tax breaks in enterprise zones and-or raising taxes on businesses will cause companies to flee California for more tax-friendly pastures.

What these proponents of so-called free markets and free trade (aka laissez-faire capitalism) generally forget or fail to mention is that countless businesses have long since left California and the rest of the United States for low-wage, low-cost markets overseas, and this has been happening for some time.

The loss of America's manufacturing base to outsourcing and globalization is undisputed.

Now, a new report by the Public Policy Institute of California confirms the hollowness of the economic development strategy that California and other states have been pursuing to address the erosion of the U.S. manufacturing base caused by capital flight, outsourcing and foreign direct investment.

After comparing job growth in enterprise zones with employment in comparable areas, PPIC found that California's enterprise zone program, which relies on tax breaks and tax credits to businesses to spur job creation, "has no effect on job or business creation." In other words, providing state subsidies, tax breaks, credits and other incentives to companies in the hope that they will create jobs to alleviate poverty and unemployment not only fails to increase jobs, but this approach is basically akin to flushing taxpayer money down the toilet.

Supporters of this method of economic development are likely to disagree. Understandably, if we all owned companies that received annual gifts from the state in the form of taxpayer dollars, we too might readily see the benefits of such a program.

Unfortunately, for the vast majority of us who don't own businesses that rely on state- sponsored subsidies, what this practice amounts to is the outright theft of our tax dollars.

As the state's largest economic development program, the enterprise zone program costs California taxpayers half a billion dollars a year.

This means that every year $500 million worth of our hard-earned tax dollars are transferred to select individuals and businesses in the private sector who have made some vague promises of using the public purse to do some public good.

The dubious results of this strategy in the area of job creation show that using taxpayer funds to subsidize private sector growth is a losing proposition for the state and all its citizens, as the quality of public services such as education, health care, infrastructure, transportation etc. continue to deteriorate due to a resultant lack of funds.

In light of California's ongoing budget crisis and as a general proposition, all tax breaks associated with the enterprise zone program and similar types of programs aimed at channeling taxpayer money to subsidize economic development by private sector companies should be quickly eliminated.

This and similar proposals are contained in an alternative budget proposal prepared by the American Federation of State County and Municipal Employees, which has found $44 billion worth of recurring revenues to balance this year's budget and all future budgets in California.

As we look across our state and our country, it is clear that outsourcing, capital flight, the loss of our manufacturing base and the tax-breaks-for-business approach have created an economy where the remaining jobs consist of low-wage, low-skill service jobs and high-wage financial, entertainment and telecommunications jobs.

Those lucky enough to be employed in high-wage positions like the ones mentioned above may have little problem with the way economic development has been occurring in California and the rest of the nation over the last 30 years.

However, for the vast majority of us who have failed to share in this wealth, it is about time for us to put an end to this system of welfare for the business community. Such a system is both unsound and un-American.

Pelote is an assistant director of the American Federation of State, County and Municipal Employees.