Trump Plan Could Spur State Competition for Businesses

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By Chris Opfer

President-elect Donald Trump’s vow to keep businesses in the U.S. could heat up the already tough competition among states seeking to lure employers to set up shop within their borders.

“I would say that the states are already in a highly competitive global environment,” Cynthia Rogers, an economics professor at the University of Oklahoma, told Bloomberg BNA Jan. 11. “I would call it the kitchen sink approach: They’re trying everything and hoping that something nudges firms to select a particular location.”

Trump Jan. 11 once again pledged to keep businesses from fleeing the country, including by striking deals similar to the one he and Vice President-elect Mike Pence helped broker in November to keep a Carrier Corp. manufacturing facility in Indiana. That may create a bidding war among states already trying to keep businesses and attract new employers with tax incentives, infrastructure spending and job-training packages.

“What really is happening is the word is now out that when you want to move your plant to Mexico or some other place and you want to fire all of your workers from Michigan and Ohio and all these places that I won, for good reason, it’s not going to happen that way anymore,” Trump told reporters at a news conference in New York.

“You can go anywhere; you’ve got a lot of states at play, a lot of competition,” Trump continued. “So it’s not like, oh, gee, I’m taking the competition away. You’ve got a lot of places you can move. And I don’t care, as along as it’s within the United States.”

Getting on the Map

Competition among states is getting so stiff that the investment money, hiring and other advantages that come with convincing a business to move are often overshadowed by the cost of the incentives dangled to land the deal, both Rogers and Mark Muro, a Brookings Institution policy director, told Bloomberg BNA.

“In an overwhelming number of cases, the costs can get very high and the job gains may be outweighed,” Muro said.

The Carrier deal included $7 million in state tax incentives for parent company United Technologies. The company also pledged to sink $16 million into renovating its Indiana plant and said the deal would save between 800 and 1,100 jobs.

The investment and job figures also don’t capture the political and branding benefits that can come with landing a big business, Muro said.

He pointed, as an example, to Tesla Motors Inc.'s decision to build its 4.9-million-square-foot battery cell manufacturing facility near Reno, Nev. The $5 billion plant is expected to house as many as 10,000 workers when it eventually reaches capacity.

“Nevada winning the Gigafactory was a special case because it put that region on the map the way that it hadn’t been,” Muro said. “There are strong symbolic aspects.”

Utah, meanwhile, has made a name for itself by attracting businesses with low taxes and a relatively relaxed regulatory climate. Val Hale, executive director of the Governor’s Office of Economic Development, told Bloomberg BNA via e-mail that the state government has focused in particular on bringing in tech, life sciences, financial services, defense and aerospace employers, among others.

Hale said the state offers employers tax and performance-based incentives that kick in when a business creates at least 50 new jobs that pay at least 110 percent of the county average wage.

“Business recruitment has been and will continue to be a highly competitive process,” Hale said.

To contact the reporter on this story: Chris Opfer in Washington at copfer@bna.com

To contact the editors responsible for this story: Peggy Aulino at maulino@bna.com; Terence Hyland at thyland@bna.com

Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.

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