Eminent Domain and Tax Incentives: Corporate take down of Government

Back on June 23, 2005 I wrote a piece covering the Supreme Court decision to back the government's ability to use eminent domain to seize private property of citizens to turn over to private industry. The flawed reasoning given by the majority court was:

just as government has the constitutional power of eminent domain to acquire private property to clear slums or to build roads, bridges, airports and other facilities to benefit the public, it can sometimes do so for private developers if the latters' projects also serve a public good.

Justice O'Conner in opposition to the majority wrote:

"Any property may now be taken for the benefit of another private property, but the fallout from this decision will not be random," she wrote. "The beneficiaries are likely to be those citizens with disproportionate influence and power in the political process, including large corporations and development firms.

She could not have been more correct. The Institute For Justice wrote the following:

In November 2000, the Mississippi legislature struck a deal with Nissan Motor Company to build a new auto plant in Canton, Mississippi. The State also granted the company more than $290 million in subsidies and tax breaks and approximately 1,300 acres of land. But apparently that wasn't enough for Nissan. In February 2001, the State exercised its awesome power of eminent domain—quietly granted by the Nissan legislation—to forcibly take the property of the Archies and transfer it to Nissan...

A state official overseeing the project admitted in The New York Times that the Archies' land was not necessary for the Nissan project, but that his office pursued the taking to save face for the State. On September 10, 2001, the Times quoted James C. Burns, Jr., the executive director of the Mississippi Development Authority, "It's not that Nissan is going to leave if we don't get that land. What's important is the message it would send to other companies if we are unable to do what we said we would do. If you make a promise to a company like Nissan, you have to be able to follow through."

So it was seen as "public good" to roll over private citizens and provide $230 million in subsidies and tax breaks as well as grab land not needed for the project. So we should ask ourselves what happened.

The Executive Intelligence Review has reported that Nissan has done absolutely nothing for the "public good" but has instead used the deal of the century to fatten it's coffers at the expense of low income and low skilled black folk.

" In its Canton, Miss. plant, Nissan has slashed wages to about 40% below what an union autoworker in one of the Big Three auto plants earns, and about 20% under the pay scale for Nissan workers in the company's Smyrna, Tenn. plant, some 300 miles distant. The average hourly wage in Canton is about $12 an hour, while the supplier industries for the plant are paying $9-11 per hour. These are poverty-level wages, for full-time, skilled industrial work.

For those of you with relatively higher incomes who may have forgotten what a 12/hour salary looks like; a 12/hour rate at a 40 hour week for 52 weeks is a gross income of $24,960. This is full time work. How, exactly is this "the public good"? But it gets worse. While predominantly black workers were being fed poverty level wages, Nissan realized massive profits:

" Under his anti-labor, "shareholder value" regime, Nissan's stock price tripled from 2000 to 2003. The Canton plant, begun in 2000, was part of the "revival."

So at least we know who got paid from all that labour. Now What about the State of MS that was so willing to throw their citizens under the bus?

The slave-labor-like conditions being enforced at Nissan's Canton plant are also severely impacting the State of Mississippi. When asked by EIR, what, if any, benefits the plant has brought to the state, which made a significant commitment to Nissan to have the plant located there, Evans was blunt: "You know, when the commitment was made, to do the Nissan plant, the initial investment was $300 million or so. And then they came back, and wanted another launch-pad, and we paid for another $64 million. And there were also other things that we paid for, as far as training, and set-up costs, and other things, and that come to around $400 million. That was the financial thing. Then, the tax breaks and the tax benefits, from the state, and from the county, and from the city of Canton, added as part of our normal economic package. And I think that folks calculated that at about $65-70,000 per job. That was the commitment that the state made to that Nissan project there."

But, those hopes were soon dashed, when the state realized that the wages at the plant were so low, that returns to the economy would be virtually nil. "To get its investment back," Evans explained, "in essence, was [the assumption] that [Nissan] would be paying workers $23 an hour. We calculated when we would get the money back. Now, if you're paying them $12 an hour, that means it's going to take you double the time to get it back, if you ever get it. And you have to examine: Is the commitment being kept? That's what the community wants ... and those are questions that the taxpayers are concerned with being answered."

In other words, workers making $24,000 per year, at best—barely above the official poverty level for a family of four—will not be paying much in the way of taxes, or have the discretionary income to spend in the local economy, as had been anticipated. Evans estimated that it would take at least 20 years for Mississippi to recover, in payroll taxes, its concessions to Nissan.

So MS effectively mortgaged 20 years of tax revenue to "get" Nissan. At the end of this deal there are no guarantees that Nissan will not decide to up and leave MS and call it "Down sizing." How long before Nissan starts to entice illegal immigrants from Mexico as other corporations do?

This very case is why I strongly opposed the Supreme Court decision back in June of last year.

Technorati Tags: Black Employment, politics, US Constitution