Gardens Vs. Corporate Welfare

Although New York City owns some 10,000 empty lots throughout the city, in a triumph of impulse over judgment, Mayor Rudy Giuliani has announced the pending sale to commercial developers of 12 lots that support community gardens.

Apparently the mayor wants to add to the city’s coffers by placing these small oases of productive greenery and mutual self-help on the property-tax rolls. Giuliani is using what Justice Louis Brandeis long ago called “other peoples’ money” to make the rich even richer at the expense of small taxpayers.

When the people who were tending these gardens in mostly lower-income neighborhoods protested, the mayor uttered another characteristic provocation: “This is a free-market economy. Welcome to the era after Communism.”

What rescued Giuliani from a burgeoning public relations fiasco was his allowing private philanthropies to buy the community gardens for about $4 million. The entire episode, however, served to highlight the side of Giuliani that grovels before the demands of corporations for all kinds of privileged subsidies.

There may have been a few among the corporate welfarists in the skyscraper canyons of Gotham who squirmed on reading the details of the community gardens fiasco, but they need not worry that they are next on the mayor’s list of welfare reform. After all, they are not $300-a-month welfare mothers. They’re powerful billion-dollar corporations that feed at the public trough.

George Steinbrenner, owner of the New York Yankees, wanted Giuliani to build him a $1.5 billion stadium and move the Yankees to Manhattan from the Bronx. Giuliani agreed — that is, until public outrage and critical economic analysis turned the tide back toward renovating the present “House that Ruth Built.”

Other corporate welfarists had no such trouble convincing a cowed city hall that a mere bluff of moving to Hoboken or Jersey City garners multimillions of dollars in goodies. These typically include sales-tax exemptions, property-tax abatements, and discounted electricity prices. Even Donald Trump, whose super high-priced condominium projects aren’t selling anywhere, still manages to wrest such tax breaks from New York City.

The King Kong of corporate welfare also rattled the high temple of capitalism — the New York Stock Exchange. Again bluffing about considering a move across the Hudson River to Jersey, the Stock Exchange secured a $900 million subsidy package from Mayor Giuliani to build a new headquarters near its present location. The subsidies amount to about $200,000 per retained job!

Other financial exchanges — the American Exchange, the Mercantile Exchange, and the Coffee, Sugar, and Cocoa Exchange — demanded similar largesse. And More Giuliani sugar sweetened the pot for media corporations, including ABC, NBC, Ziff-Davis, McGraw-Hill, Reuters, Condé Nast, Time Warner (shortly), and Rupert Murdoch’s News America. And even after CBS announced it would remain in the city until 2008, Giuliani still gave it $10 million in tax escapes and other subsidies.

Erosion of the city tax base means fewer municipal services and/or higher taxes on small business and individuals than would otherwise be the case. The corporate welfarists use the police, fire, schools, and other services but don’t want to pay the taxes that make them possible. That sounds a lot like freeloading.

When big corporations escape taxes, it also gives them an unfair competitive advantage against small businesses. Some well-regarded legal scholars believe that local and state governments that use tax escapes as bait for locational decisions by businesses violate the commerce clause of the U.S. Constitution. Thomas Enrich, professor of law at Northeastern University School of Law in Boston wrote in the December 1996 issue of the Harvard Law Review a legal analysis behind such a conclusion. A test case in federal courts is expected to be filed soon.

Other ways to stop this frenzied bidding for business is through compacts among the states. The federal government also can play a key role by legislating policies that either prohibit such tax incentives and other strip-mining or neutralize state giveaways by surcharging companies that received such subsidies. The latter approach is in a bill introduced by Rep. David Minge of Minnesota.

On June 30 the first Congressional hearings on corporate welfare will commence under the aegis of Republican John Kasich, chair of the powerful House Budget Committee. He welcomes your opinions and suggestions. Stay tuned.