Recently, the focus of the LePage administration and various government officials has been fixed upon The Opportunity Zone Program, which provides tax breaks on capital gains in exchange for capital investment in various economically depressed areas of the state. All too often, politicians tout this approach, and approaches like it, as comprehensive economic development strategies.
Don’t be fooled. This program will not provide long-term economic improvements for our state. Let me tell you a few reasons why.
Approaches that incentivize investments from wealthy, out-of-state corporate investors have been attempted many times, in various states, and have failed to deliver on their promises. In some cases, these approaches actually made state and local economies worse.
Ironically, the organization advocating for this approach, The Economic Innovation Group, admits, in a paper it published in 2015, that all previous versions of this approach, including the New Market Tax Credit program, have shown mixed results at best, and had little to no effect on reducing poverty or boosting employment in depressed communities.
Moreover, in 2015, the Portland Press Herald published an investigative article that outlined how out of state investors took advantage of the New Market Tax Credit Program for their own financial gain, resulting in the closure of the Great Northern Paper Mill and the unemployment of hundreds. There is no evidence suggesting The OZ Program will not yield the same disappointing results.
Unfortunately, the logic behind The OZ Program is based on assumptions and hopes rather than concrete evidence. The logic states, if our communities can attract investment capital, it will automatically result in good paying jobs and greater economic security.
This assumption fails to account for the fact that the program fails to establish conditions to ensure this. Conditions such as full-time employment, a living wage and benefits are never a prerequisite of tax breaks. Instead, our politicians just give them away and hope for the best. We mustn’t be surprised when the results fall short.
In an era of staggering wealth inequality, large corporations are sitting on vast amounts of wealth they have been accumulating since the recession of 2009.
As a result, we can reasonably expect a good portion of Maine’s investors to be these large corporate firms, whose financial interests do not align with the long-term well being of Maine communities. Much of these firms are not based in Maine, and are not comprised of people living in Maine communities.
Aside from a narrow drive to derive short- and long-term investment returns, large out of state corporate investors have no vested interest in the long-term well-being of our communities.
Although tax writeoffs are likely to be successful in attracting investment, it does nothing to solve the power issues at root of our state’s economic problems.
Programs like the Opportunity Zone Program merely reinforce our state and our employer’s dependence and long-term obligation to out-of-state investment. This strategy leaves much of Maine’s economic power with the large wealthy corporate investor.
This strategy obligates Maine employers, and our federal, state, and local governments to sustain tax breaks and investment returns for years, even decades to the investor.
It doesn’t have to be this way. There are alternative approaches to economic development that our politicians should be focusing on. Supporting the development of locally rooted cooperative businesses provides a sustainable, locally rooted alternative.
A cooperative business is a legal ownership structure that allows for each employee of a business to own an equal share of that business. These businesses are then self-managed by all worker-owners collectively, using structured governance models.
This model has been found to have immense potential in improving Miane’s economy. Just ask Vaughn Woodruff, former owner of Insource Renewables, who recently sold his business to his employees, and has written about the economic and social benefits of doing so.
Or ask Davis Taylor, a professor of economics at The College of the Atlantic who discusses the model’s potential to transform Maine’s economy.
Supporting the development of cooperative businesses is supporting the development of Maine’s working people and the communities they belong to in the long run.
It is Maine people who would run cooperative businesses, and it is those very people who would base their business decisions on what is good for themselves, their businesses, and the surrounding community.
Unlike the wealthy out-of-state investor, the Maine people who run cooperative businesses have a large stake in ensuring that they are benefiting their communities in the long run. Unlike the investor, it is where they call home.
Why are our politicians looking anywhere else?
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