Carrier Deal in Indiana Prompts New Debate About Economic Development in Virginia

Dec 2, 2016

President-elect Donald Trump was able to negotiate a deal to protect about a third of the Indiana jobs that air-conditioner maker Carrier was planning to ship to Mexico. The deal was struck not by threatening tariffs, but by offering $7 million in tax breaks as part of an economic development package. 

Virginia has offered more than $900 million in subsidies to business, but with mixed success. Take the sixty million in tax credits and grants promised to Rolls Royce even though the company has not met employment goals. Then there’s the $54 million to Volvo even though the company is downsizing in Virginia. Terry Rephann at the Weldon Cooper Center for Public Service says in a perfect world, these subsidies would not be needed.

“A lot of those tax refunds could go toward lowering tax rates or spending on infrastructure. But as long as other states are doing it, Virginia has to participate in that game as well or lose out on economic development prospects.”

Credit Carrier / United Technologies

Greg LeRoy of Good Jobs First, a group that tracks corporate subsidies, says these kinds of economic development efforts often leads to problems.

“Over and over again at the state level, we see agencies resisting oversight, sometimes not covered by open-records laws, open-meetings laws, ethics laws, conflict rules. And therefore, it’s almost Groundhog Day reading these case studies over and over again. You get the same structural corruption problems.”

Last month, a scathing audit of economic development in Virginia uncovered poor operations and mismanagement.