A new documentary profiles examples of corporate welfare that shortchanged taxpayers and business owners, including in Memphis, where city officials bestowed a generous tax break upon IKEA.
This documentary, Corporate Welfare: Where’s the Outrage?, debuted on public television and YouTube late last month. Free To Choose Media Executive Editor and Cato Senior Fellow Johan Norberg hosted the documentary.
The documentary profiled how Memphis’ Economic Development Growth Engine (EDGE) gave IKEA a $9.5 million tax break over 11 years in exchange for IKEA agreeing to create 175 new jobs. Each new job was to offer an average salary of $41,000 per year. Memphis EDGE’s actions displeased the city’s other business owners, who were based locally, according to the documentary.
Mark Cunningham, with the Nashville-based Beacon Center of Tennessee, appeared on the program.
“You are really pitting these gigantic corporations who know the government and have tons of lobbyists against Mom and Pop shops in our community that we are trying to save,” Cunningham said.
“You are basically asking people to pay more tax dollars in order for their competitor to succeed over them.”
Beacon is a right-of-center think tank.
IKEA officials defended their actions in an email to The Tennessee Star on Tuesday.
“States and municipalities across the U.S. work hard to attract new businesses and gainful employment opportunities for the benefit of residents and communities. In 2016, IKEA proudly opened our Memphis store. As part of the planning process, we partnered with local government on an economic development package that helped make this investment possible,” IKEA officials said.
“In 2019, we proactively asked the Economic Development Growth Engine Industrial Development Board of the City of Memphis and County of Shelby, Tennessee (EDGE) to adjust the terms of our initial incentive package, and they agreed to the proposal. We are proud of the 157 jobs we have in IKEA Memphis today allowing us to continue to bring home furnishing solutions to our many customers in the area.”
IKEA ended 2018 with 147 employees on site, 28 jobs short of its commitment to bring 175 new jobs to Memphis. Employees made a median average wage of $36,944 at the end of 2018, $4,067 short of the IKEA’s commitment to pay employees $41,011 without benefits.
Officials with the European-based company described just how selective they are in choosing store locations. IKEA’s application revealed the company picked communities based on where it can get the most generous tax incentives.
Those areas include St. Louis, Merriam, Kansas, and Centennial, Colorado, according to IKEA’s application with Memphis.
The documentary also chronicled instances of crony capitalism in Chicago and Baton Rouge, Louisiana.
“Many government programs begin with good intentions, but they result in unintended consequences,” Norberg said in a press release.
“From what I’ve observed…it’s better to let the economy evolve in its own natural way, rather than to rely on government intervention.”
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