IF YOU DON’T WANNA play by my rules, I’m gonna take all my toys and go home! Then you’ll be sorry. You won’t have anybody to play with!
It’s the classic, take-it-or-leave-it bluff. Parents counsel their kids to work things out, play by the rules and share. Yeah, sure, Mom. But the real lesson for children as well as adults comes in figuring out whether you can call the other person’s bluff and come out the winner.
That proposition played out a few weeks ago, when the county Industrial Development Agency decided not to give the owners of the proposed Kohl’s department store at the Greenport Commons shopping plaza a huge tax break. The plaza developer, the Widewaters Group, said the popular retail chain would not build its store here if it didn’t get the deal it wanted.
The threat sounded credible. The Columbia County market is small compared to many others where the chain has built stores, and in this economy the promise of new jobs and tax revenues seemed at first glance like an obvious winner. That’s why some politicians and the IDA considered the idea at earlier phases in the process.
But taxpayers slammed the thought that another big box store would pay a fraction of the tax rate while it sucked customers away from smaller retailers. As one town councilman explained the math: If Kohl’s pays lower taxes, then taxes for others will go up.
So after the IDA came to its senses and nixed the tax break, did the sky fall? Kohl’s hasn’t built a store yet, though it has paid a hefty sum to Greenport for the costs associated with the review of its project. And TJ Maxx, a company that the developer said would never build a store here if Kohl’s didn’t commit to its own new building, has broken ground. For what it’s worth, the Widewaters Group website lists both Kohl’s and TJ Maxx as having stores at the sprawling site.
In February, after the IDA turned down the first request by Kohl’s for a tax break, we urged that applicants for each large development project pay for an independent analysis of the economic impact of the proposal. Such a requirement would have to be adopted by towns and by the county. But we haven’t heard anybody discussing that idea or any other lesson that learned from Greenport Commons experience.
Maybe the IDA and local officials are feeling kind pumped up these days. After all, they called the bluff of the stores and the developer, and it turns out that the stores find the local market so attractive they are willing to pay their fair share of the property tax to get at it.
But that raises another question. If the smart people who run these large retail chains were so ready to drop their demand for a tax break, was there a missed opportunity to turn the tables and ask the stores to share some of their wealth with the community?
Granted, taxes are one way that every property owner shares in the burden of maintaining basic services. But as everyone who pays the property tax knows, it’s a grossly unfair system, because it’s not related to a taxpayer’s ability to pay, nor does it account properly for the impact the use of some properties have on the community.
Towns and counties lack the authority to impose any sort of progressive income tax on businesses, and that’s probably a good thing considering the opportunities for abuse. And as a practical matter there’s no future in trying to extort unreasonable benefits from big firms, because that approach would just drive business away. But countering demands for tax breaks with calls for specific improvements that exceed what the law requires–addressing impacts like traffic, pavement, lighting, and energy and water use, for example–might yield benefits that would save taxpayers lots of money in the long run.
This approach can’t be invented on the spot; it has to be part of local regulations triggered as soon as a company requests a break in its property taxes. Any new rules should also take into account that sometimes tax breaks make good sense for companies and communities. But determining when and under what circumstances to grant breaks isn’t a game. It’s a serious business, and it’s time that county and local officials had more tools to use as they negotiate the terms of our future.