‘Corporate welfare’ or protecting good jobs at good wages: BIW tax credits

27 March 2018

Dear Friends and Neighbors,

This morning the House voted on LD 1781: An Act To Encourage New Major Investments in Shipbuilding Facilities and the Preservation of Jobs.

The original bill sought to extend a state tax incentive of up to $3 million per year for capital investment by <a href=”https://www.gdbiw.com/”Bath Iron Works</a> for 19 years from 2020 to 2039. The bill would have required BIW to invest at least $100 million and maintain at least 5,000 employees over the same period.

Proponents supported the bill because BIW is the largest remaining manufacturing business in the state and because the company maintains good wages and benefits for 5000 Mainers while competing against non-unionized shipyards on the Gulf Coast which enjoy both substantial public subsidy and much lower expenditures for labor and benefits.

Opponents objected to the bill as “corporate welfare” for BIW’s wealthy parent company, General Dynamics and further objected to it as subsidizing the military-industrial complex at a time when Maine and the nation have growing public social needs.

With the support of the state’s business community, the bill might very well have passed primarily with Republican support.  Even so, the Taxation Committee was able to negotiate with BIW to amend the bill in ways which increased the public benefit.

As amended, the bill reduces the period of the tax credit from 19 years to 15 years.  Further, to qualify for the tax credit, the bill requires BIW to invest $100 million in the first ten years and then another $100 million in the following five years — over four dollars of capital investment for every dollar of the tax credit. The amendment also creates more aggressive requirements for employment in order for BIW to receive the full value of the credit. It also removed the provision for the tax credit to be refundable if BIW’s tax liability were to be less than the value of the credit.  Last, the amendment requires state review of the effectiveness of the credit in 2024.

In many ways, given the state’s checkered history of ineffective tax expenditures, I trust that these more stringent requirements ensuring return on public investment will serve as model measures for state business tax breaks going forward.

Because, I think the Taxation Committee did good work on this bill and moved it substantively in a direction that better serves the public interest, I ended up voting in favor of the amended bill because I believe that when one negotiates and wins real concessions, one also must support the final agreement.

The House vote was 113-31.

Leave a Reply

Your email address will not be published.