Tax incentives and the individual taxpayer burden:
When a community grants large tax incentives to a major employer, this decision can have a direct impact on the individual taxpayers who don't necessarily benefit from the higher-paying jobs a large employer might bring to the community. Here's a breakdown of how the burden shifts:
1. Higher individual taxes
- Property tax increases: Local governments rely heavily on property taxes to fund schools, public safety, infrastructure, and other essential services. When a large corporation receives property tax abatements, the tax burden on homeowners and other businesses can increase to make up for the lost revenue, notes HAR.com.
- Fees and assessments: Communities might introduce or increase fees for services like water, sewage, garbage collection, or permits to offset the revenue losses from tax incentives given to a large employer.
- Sales tax hikes: Some local governments may consider raising sales tax rates, which can impact all residents, disproportionately affecting lower-income households as a larger portion of their income is often spent on taxable goods.
2. Reduced public services
- School funding cuts: If property tax revenue is reduced due to corporate abatements, schools might face budget cuts, potentially leading to larger class sizes, fewer educational programs, or even school closures.
- Strained public safety resources: Increased population without a proportional increase in tax revenue can strain police and fire department resources, potentially affecting response times and public safety in the area.
- Infrastructure deficiencies: Lack of funding for road maintenance, water system upgrades, or other infrastructure needs can affect everyone in the community, leading to potholes, water outages, and more.
- Limited access to healthcare: If tax incentives result in reduced funding for public hospitals or community health centers, individuals may experience longer wait times, reduced access to specialized care, or increased healthcare costs.
3. Economic disparity
- Wage stagnation: While a large employer might promise job creation, these jobs don't always pay high wages, especially for lower-skilled workers. Additionally, studies have shown that when corporate tax rates are cut, wage growth for middle-class taxpayers can be negatively impacted, says the National Taxpayers Union.
- Disadvantaging local businesses: The tax incentives and preferential treatment given to large corporations can disadvantage smaller, local businesses that pay their full share of taxes and are often the backbone of the community's economy.
- Concentration of benefits at the top: While the average taxpayer shoulders a larger tax burden, the benefits of tax cuts often accrue disproportionately to high-income earners and shareholders of the large companies receiving the incentives, according to the Center on Budget and Policy Priorities.
In essence, when a community offers substantial tax incentives to a major employer without adequate safeguards, the individual taxpayers who may not directly benefit from the higher wages are often left to foot the bill through higher taxes, reduced services, and an increasing economic divide.
