Tax Credits for New Jobs, but Really for Union Busting?
June 8th, 2012 | Mike Elk
A California-based company called VWR is busting its union, moving work to a non-union workforce a few hours away and receiving both federal and state tax incentives to do it. The scandal is yet another example of how companies can game the tax systems while hurting workers, and the government does little to stop them.
In Brisbane, Calif., 183 workers, members of Teamsters Local 853 that work at VWR, will lose their jobs at the end of the year when their scientific chemical warehouse closes. VWR, which is owned by Chicago-based private equity firm Madison Dearborn Partners, is moving the warehouse 230 miles away to Visalia, Calif. At the warehouse in Visalia, workers will be non-union and are expected to make half of what the current workers in Brisbane earn, according to the Teamsters.
The job losses will devastate local workers, many of whom are close to retirement age and will have difficulty finding jobs elsewhere. It will also devastate the city of Brisbane. A study conducted by the Federal-State Inquiry into Job Losses and Misdirected Tax Policy, chaired by Rep. Jackie Speier (D-Calif.) and California State Treasurer Bill Lockyer, found that the warehouse closure will result in the loss of 183 direct jobs and 83 indirect jobs among the suppliers and surrounding community in the Brisbane area. The loss of jobs will also reduce the City of Brisbane’s tax revenue by 18.5 percent.
The company, though, will benefit financially not only from halving workers’ salaries, but from a large amount of federal and state incentives to move. The City of Visalia, where the warehouse is being moved to, has received $2 million in federal Department of Commerce grants to do infrastructure improvements to the industrial park where the new warehouse will be located. VWR will also receive a total amount of $30,000 over a five-year period in tax credits from the state of California for every new worker hired.
“They aren’t creating new jobs, all they are doing is union busting,” says VWR worker John Thomas. “It’s a shame they are getting our tax dollars to destroy good middle-class jobs.”
This isn’t the first time VWR has used the new hire tax credits intended for job creation to simply move jobs from one place to another. Recently, the company received tax credits from Monroe County, N.Y., to move jobs from one warehouse in Towanda, N.Y., to another warehouse in Henrietta, N.Y. The move resulted in the layoffs of 41 warehouse workers in Towanda.
“I think this is a formula that union and non-union companies are using to abuse federal funds. You are not creating new jobs. You are really just transferring jobs and getting paid to screw these people out of their employment,” says Teamsters International Vice President Rome Aloise. “There should be some restrictions on how federal funding is provided to not allow this kind of transfer to occur.”
There are supposed to be “non-relocation” laws in place at the federal level to prevent corporations from receiving federal tax dollars for moving jobs from one area of the country to another area of the country. Teamsters are upset that the Department of Commerce is still providing a $2 million dollar infrastructure improvement grant for a project that will facilitate union warehouse jobs being moved from Brisbane to Visalia. The Department of Commerce counters that it has not violated “non-relocation” laws since the grant was intended to facilitate the creation of other jobs besides VWR ones in Visalia’s industrial park. Furthermore, the Department of Commerce claims it didn’t know about the VWR facility when issuing the $2 million grant.
“The site of the VWR facility was not contemplated as part of the project, nor was it included in any job creation estimates. Moreover, the City advises us that it had no knowledge of VWR’s interest when it applied for EDA funds and that it did not solicit or court the company to relocate,” wrote Assistant Secretary of Commerce for Economic Development John Fernandez in a letter to Teamsters President Jimmy Hoffa, Jr. “As the decision should be clear from the above, the decision to the Plaza Driver project was entirely independent of the VWR matter.”
However, in a written response to the Commerce Department, Hoffa Jr. argued:
Just as VWR is dealing in bad faith with employees and the City of Brisbane by refusing to explore viable alternatives, VWR and the City of Visalia are dealing in bad faith with the U.S. Department of Commerce, Economic Development Administration and U.S. taxpayer about how will benefit from this public financing. The $2 million grant awarded to the City of Visalia in April 2011 to make infrastructure improvements to Plaza Driver will benefit VWR in its relocation efforts according to city documents and news reporters. However VWR was omitted from the list of companies, Visalia identifies as beneficiaries in its EDA grant application.
As evidence of Visalia’s bad fatih, the Teamsters point to an August 2010 newspaper account that quotes the Visalia City community development director saying that “the planned widening of Plaza… and improvements to Riggin Avenue… (and) the Betty Drive interchange… were big selling points to (VWR).“ But it appears that regardless of whether Visalia told the truth in its application for the $2 million grant, the city will receive the money and Brisbane’s workers will lose their jobs.
Economist Dean Baker, co-director of the Center for Economic Policy and Research, says such schemes are intrinsic to programs that give tax credits to companies hiring new workers.
You inevitably run a risk with new hire credits that most of the hires would have occurred even without the credit,” says Baker. “In those cases, you’re giving money for nothing. Obviously the story is worse when what you’re giving money for is a union-busting scheme. As a practical matter, this can be hard to prevent since there will always be some way to game the system.
This blog originally appeared in Working in These Times on June 7, 2012. Reprinted with Permission.