Walter Johnson isn’t an urban historian, having made his mark with a couple of outstanding books on American slavery and its connections to capitalist development. But this piece at The Atlantic is well worth a read, although it’s long. Part of Johnson’s story is familiar–the relationship between Ferguson police and city government and the city’s black population have been strained by the way that the government has squeezed the black public for fines in order to fund itself. But there’s something Johnson points out that I honestly had never read about before, one of those things that’s frequently hiding in plain sight.
Ferguson’s social and civic breakdown doesn’t really fit the most common narrative framework–that of industrial decline and capital abandonment of the city or the region. In fact, the city of Ferguson itself is the headquarters of a Fortune 500 company, Emerson Electric, which does about $24 billion in business annually. The problem, Johnson argues, is the collision of decades-old Missouri laws restricting the powers of cities to tax and newer regimes of economic redevelopment under which cities, even those strapped for resources like Ferguson, purposefully forego taxing large corporate property owners.
But Ferguson is extraordinarily constrained in its ability to pay for the services that its residents require. Municipal tax revenue is limited by the Missouri constitution. In 1980, Representative Mel Hancock—the founder of a group called the Taxpayer Survival Association—wrote an amendment that required any increase of local taxes, licenses, or fees to be approved by a citywide referendum, with very few exceptions. Along with gun-license fees, which are explicitly exempted from the provisions of the “Hancock Amendment,” municipal fines provide Missouri cities with one of the few sources of revenue they can expand without a referendum.
The Hancock Amendment, like similar laws in other states, radically constrains the possibilities of municipal governance. Unable to raise tax rates, many municipal governments have only one tool at their disposal: lowering them. They cannot raise money, but they can give it away.
This setup is part of what political sociologist Isaac Martin calls The Permanent Tax Revolt and a product of what he elsewhere describes as Rich People’s Movements. The institutionalization of tax revolt politics has created significant political restraints on cities’ fiscal powers at a time when devolution of responsibility for social provision has created new demands on municipal budgets.
What this means is that, unlike in prior eras, capital investment in a community carries few guarantees of quality jobs, and, through abatements, incentives, and book-cooking by tax assessors, often delivers nothing to the local tax base. In the case of Emerson, St. Louis County’s tax appraisals and effective assessments are so low, partly by being pegged to the value of surrounding parcels, that the company actually chose to forego lucrative tax abatements because under ordinary tax policies its bills have been so low that the public relations risk of accepting tax abatements proved an unacceptable tradeoff. Johnson:
The rock-bottom assessment value of the Ferguson campus helps ensure that West Florissant Avenue remains in its current condition, year after year. It severely limits the tax money Emerson contributes to the Ferguson-Florissant district’s struggling schools (Michael Brown graduated from nearby Normandy High School, a nearly 100 percent African American school that has been operating without state accreditation for the last two years), and to the government of St. Louis County more generally. On the 25 parcels Emerson owns all around St. Louis County, it pays the county $1.3m in property taxes. Ferguson itself receives far less. Even after a 2013 property tax increase (from $0.65 to the state-maximum $1 per $100 of assessed value), Ferguson received an estimated $68,000 in property taxes from the corporate headquarters that occupies 152 acres of its tax base—not even enough to pay the municipal judge and his clerk to hand out the fines and sign the arrest warrants.
The problem in Ferguson, and in places like it, isn’t disinvestment, it’s investment on a set of terms slanted egregiously toward private interests. Maybe attaching this tale of screwed up political economy to Ferguson will help draw attention to it, because the political system has shown a remarkable capacity to ignore it. Louise Story wrote a series of articles in the New York Times in 2012 describing Texas’s commitment to tax breaks and the dubious public benefits thereof:
Under Mr. Perry, Texas gives out more of the incentives than any other state, around $19 billion a year, an examination by The New York Times has found. Texas justifies its largess by pointing out that it is home to half of all the private sector jobs created over the last decade nationwide. As the invitation to the fund-raiser boasted: “Texas leads the nation in job creation.”
Yet the raw numbers mask a more complicated reality behind the flood of incentives, the examination shows, and raise questions about who benefits more, the businesses or the people of Texas.
Along with the huge job growth, the state has the third-highest proportion of hourly jobs paying at or below minimum wage. And despite its low level of unemployment, Texas has the 11th-highest poverty rate among states.
It’s time we start taking seriously what a “better business climate” has meant historically. As writers like Kim Phillips-Fein show, the set of tax and regulatory conditions that are taken to constitute such a climate have been defined by the Chamber of Commerce and National Association of Manufacturers. The “better business climate” is what’s good for business, nothing more, and nothing less.