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This is what drives the Democrats in my state absolutely nuts. Tax credits for business will make their head spin.
But, here's how it works in very, very simple terms, since I'm certainly not an economist (and I want to go to bed early tonight) :-)
Here's how it works:
-company gets tax break/incententive to invest in the area
-company uses money to expand/build/hire employees
-employees become tax payers - off unemployment, food stamps, or other gov't assistance (who doesn't win with that!) - they buy lots of stuff from other local businesses - most importantly, they have hope for the future
The final result is this:
-employees are happy because they are working and taking care of their families without gov't help
-employers are happy because they make money
Come on, what's not to love about that?
Here are a few examples here in my state:
Aided by a $1.1 million state tax credit, auto supplier Key Plastics LLC is planning a $10.3 million investment that will relocate products from an Indiana plant to Howell and also send some work to a plant in west Michigan's Cascade Township, creating 297 total jobs, the state said today.
The project, one of 10 approved Tuesday by the board of the Michigan Economic Growth Authority. The companies estimate the projects will generate up to $602 million in new private investment, adding a projected 1,911 direct jobs.
To support the project, the Howell City Council has approved a personal-property tax abatement valued at about $303,000.
Other Southeast Michigan projects to receive tax breaks from the MEGA board included:
• Plans by Auburn Hills-based Dialogue Marketing Inc. to add 230 jobs as part of a $5 million expansion of its call center operations.
The expansion, which would be at the company's Troy location, includes technology development, custom software development and support services for the company's retail, health insurance and business services clients, according to a MEGA board briefing memo.
The company was awarded a $474,012 tax credit.
• The arrival in Michigan of Florida-based Health Business Solutions LLC, a consulting firm that works with the health care industry to resolve denied claims and improve performance.
The company plans to hire 206 people and open a $2.6 million center in Dearborn where employees will work with health care providers to resolve denied claims portfolios and recommend processes to reduce the number such claims in the future, state documents said.
The MEGA board approved an $816,218 tax credit for the firm, and the city of Dearborn expects to approve an estimated $50,000 in tax abatements to support the project.
• A $6.1 million investment by Lakeside Software Inc. to expand software development operations at its headquarters in Bloomfield Hills and also locate operations in downtown Ann Arbor, creating a total of 198 jobs.
Local assistance includes a commitment from Oakland County for jobs training assistance valued at $1.9 million, payment of the $1,000 MEGA application fee by Ann Arbor Spark, one-year bus passes provided by the Ann Arbor Downtown District Authority and a three-year membership in Automation Alley.
Lakeside was awarded a $731,244 state tax credit.
• A $4.6 million investment by Detroit Heavy Truck Engineering LLC to expand at its Novi location, creating 49 jobs. The company is involved in the design, engineering and support of heavy equipment for the mining industry, including trucks and shovels.
The company's expansion reflects several new contracts, according to a MEGA board briefing memo. The board approved a $234,152 tax credit. The city of Novi paid Detroit Heavy Truck's $1,000 MEGA application fee.
• A $280 million investment by steel maker Severstal Dearborn Inc. for a new high-speed line to heat and cool steel strips. The project is expected to create 70 jobs and was awarded a $10 million brownfield tax credit. In addition, the MEGA board approved a plan to capture $97.3 million in local and school taxes to support the project's brownfield redevelopment activities, including demolition and site preparation.
http://www.crainsdetroit.com/article/20110315/FREE/110319960/key-plastics-10-3-million-project-is-among-proposals-receiving-mega-tax-breaks#They don't have a conscience because they are in business to make money for the shareholders. I don't think it's a simple solution. There are many things that factor into it.
I think one simple fact is us - the consumer. We don't (or can't) pay $600 for an American-made product when we can get the exact same product that was made overseas for $400. We can't compete with the $20 per day worker. Consumers will not pay the extra money for the product made here.
"Why are companies outsourcing work to other countries? Simply put, the current economic structure strongly encourages companies to move their jobs overseas. Using cheap overseas labor to make products and deep American pockets to buy them, companies can increase their profits on both sides of the production equation.
Add in the fact that several countries, like Ireland and the Netherlands, offer attractive tax rates, and in many cases, it doesn't even make sense for companies to bring their profits back to American banks. The U.S. corporate tax rate is among the world's highest, with a federal rate of 35% and state rates that can tack on up to 12% more. By comparison, China charges 25% and Korea's starts at 13%.
The problem is compounded by America's tax policy, which allows companies to hold off on paying American taxes until they bring those funds into the U.S. Not surprisingly, many companies park their profits in foreign banks: General Electric, for example, has $62 billion in profits sitting in offshore bank accounts."
http://www.dailyfinance.com/story/media/outsourcing-offshoring-rises/19689999/
Another fact - agree with it or not - is that companies, big and small, are in business to make a profit. Why does a person start a business? If I were to start a business, one of my goals would be to make a profit. Before you jump all over me about businesses making too much money and treating their employee like trash - I know, I know - we probably have all been treated like garbage at one time or another. But you also have to note that many of these larger corporations, and those who are the major shareholders, are some of the most generous people on the face of the earth. The world is a better place because of philanthrophy - hospital wings, schools, libraries, scholarships, etc., we all benefit. On a personal note, I get all of my drugs delivered free to my door every 90 days because of the programs set up by the drug manufacturers to help people like me who would not be able to afford the drugs otherwise. I'm thankful for that.
http://philanthropy.com/article/Americas-Biggest-Donors-in/126264/