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Tax incentives may help local economy, but what about us?


MUCH was made a few weeks ago over whether a Texas county would give Apple Computer Inc. a tax break even though the company extended health and other benefits to selected companions of its employees regardless of marital status or gender.

So much was made of it that almost every question was asked except the most important one. Apple is a very profitable company. Its net profit last year was $530.4 million, a nice increase over its 1991 profit of $309.8 million.

So why shouldn't it pay all taxes due?

Well, Apple spokespersons were reluctant to discuss the matter, but the answer is simple: Why should it? If somebody's going to give you a goodie, you take it.

And the way things work these days, some government is going to give almost every company some kind of goodie, either letting it pay little or no taxes or springing for its sewage and water hookups, or building it an access road or some combination of the above.

By comparison, Apple was only getting a pittance, $750,000 in reduced property taxes over 10 years. Mercedes-Benz got $300 million in tax breaks and other subsidies from Alabama to build its new plant there.

The official name for this is economic development, perhaps because it sounds, oh, so much more respectable than bribery. Actually, economic development may not rise to the moral level of bribery. The dictionary defines a bribe as anything "given or serving to persuade." The dictionary doesn't say so, but the implication is that the briber is giving something of his or her own in order to do the persuading.

In economic development, the offer is made by local public officials, but what they are offering is not theirs. It's yours.

Just last week the city of Chicago and the state of Illinois successfully offered a br . . . uh, a package to the Nabisco Biscuit Co. in return for its agreement to continue to bake its Oreos and Fig Newtons on the Southwest Side. The price was a reduction of $29 million in the company's state taxes over the next 10 years and at least $35 million in city taxes.

But neither the city, the state nor the bakery can reduce the number of children who have to be taught, the number of cops whose paychecks are due every two weeks, the miles of roads to be repaved or the parks and playgrounds to be maintained. Now that Nabisco will pay at least $65 million less to support these necessities, the rank-and-file citizens of the state and city, most of whom did not net $299 million last year, will pay more.

It's hard to blame any individual person for this. If the companies don't take the money, their competitors will. If local governments don't give it, their competitors will, and the plants and jobs will go to the localities that give the most.

Nor would it be fair to allege that these government subsidies to private business are nothing more than regressive giveaways to the rich. It is not just the companies that benefit, but also their employees and the communities where they locate. Some of these communities need all the help they can get, and using tax preferences to help them is reasonable policy.

But there is no denying that the result is an unseemly bidding war in which states, cities and counties vie with each other to see which can reduce their tax base the most. This unseemliness has recently been recognized. At the behest of Gov. Jim Edgar of Illinois, the National Governors Association passed a resolution last August urging restraint in "development incentives" and decrying "unreasonable" benefits.

Nor is there any doubt that the net result is economically regressive. Nobody seems to know just how much tax burden is shifted from wealthy business owners to middle-income citizens. But it's a lot, perhaps hundreds of millions of dollars a year.

If the practice were banned by federal law, local governments could get out of the business of bribery and back to the business of governing, which would become less expensive because they could close down their economic development offices. And private business could operate under the free enterprise system, which it supports for all segments of the economy but its own.

In Williamson County, Texas, where Apple Computer will build a customer service center after all, tax assessor Dorothy Jones says tax abatements are unfair to most taxpayers. This year, she said, four companies are paying $4,221,605 less in taxes, which means 86,000 other property owners are paying that much more. "If my house is valued at a certain amount," she said. "I don't get an abatement. I don't see why they should."

There are some foolish people in Williamson County government. Dorothy Jones is not one of them.

Jon Margolis is a columnist for the Chicago Tribune.

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