Tax Abatements

Tax abatements are proliferating way beyond what they were used for years ago. 

Manufacturing operations looking for a good place to settle, would go to small towns in rural counties looking for low land cost and a good workforce in a right-to-work state.  These plants hired 100 or more employees.  If the town needed the jobs, the tax holiday would go on the ballot and usually passed.  The plant would hire locals and add to their family income.  This plan worked before we off-shored most of our manufacturing jobs and will work again, if we can get those jobs back to the US. But returning manufacturing to rural counties is the only good use of tax abatements I can think of.

Now tax abatements are given in large metro areas and decided without voter approval and without a valid reason to justify giving up tax revenue. 

The reason governments make these deals we are told is to get newer buildings with a higher taxable value so the city or county can raise its tax base and charge more money for the newer properties. The dollars these cities and counties contribute to this scheme are not spent on maintaining roads, bridges, sewer or water systems. Tax dollars that were once used for government functions are now used for “economic development” in “private/public partnerships.

So why is this the new normal ?  Before developers could get donations from taxpayers, they had to secure their own financing and put their own money at risk.  When they do this, they are very careful to make sure that their new business would be sustainable. But with taxpayer philanthropy, if the project fails, the taxpayers pay. Too many of these projects have failed, because they are over-leveraged, so any loses they can have the taxpayers take reduces the losses they have to take.

Developers, builders, lawyers and brokers get their money and split and banks sell big loans, but property companies need to be able to charge rents that are high enough to keep their cash-flow going.  This doesn’t typically happen with private/public partnerships.  Properties fail and are resold several times before settling into their place on the tax registry.

Norb Leahy, Dunwoody GA Tea Party Leader