Disclosure: The opinion and analysis presented here are by a layperson, based on an independent study of Maine economic development statutes.
Amazon Strikes America!
In 2018, Amazon was looking for a location for new headquarters.
In an article by Wharton University, Management, it is speculated that Amazon knew all along where their new headquarters would be located, but as a long-term side effect, the contest produced a comprehensive map of corporate welfare opportunities in the USA, available to global corporations everywhere!
.. Amazon received 238 proposals by the October 19 deadline from big cities like Boston, Chicago and Atlanta; smaller hip cities like Austin and Portland; gritty, nouveau-hip sites like Detroit and pre-hip Camden, N.J. (where the slogan is “Experience the Rebirth!”): regional bids like ones from Central Indiana or a three-city package in Missouri; and Northeast hopefuls betting on proximity to the corridors of power, like Philadelphia, Baltimore and Washington, D.C The Headquarters Checklist: How do Companies Pick a Location- Wharton University
Governor LePage knew that the Amazon Headquarters Contest created tough competition among the states.
By strategy or happenstance, the national contest for the Amazon headquarters coincided with the enactment of the most ambitious corporate welfare legislation, in Maine’s history, the Major Business Headquarters Expansion Act, which despite a name identifying it as a major act, was passed with barely a mention in the Maine media.
MRRA and Scarborough Downs submitted proposals for an Amazon Headquarters. Both said they had everything Amazon was looking for except population size. The Maine media reported that the details of the offer were unknown.
Officials involved in those proposals (MRRA & Scaroborough) confirmed that they were submitted on time but would not disclose the details of their offers. Portland Press Herald Maine’s in the mix as 238 places vie to host Amazon’s 2nd headquarters
Transactions at the State
It isn’t difficult to figure what was offered to Amazon if you know where to look. The terms are defined in the Major Business Headquarters Expansion Act, signed by Governor LePage on July 27, 2017.
The Major Business Headquarters Expansion Act is a transactional agreement. Maine gets a private corporate investment worth $35,000.000 in a national or global corporate headquarters providing at least 1250 jobs in exchange for a refundable tax credit worth 2% of the global or national corporations' “unitary business investments”, and thus the global world capitalist order was codified into the Maine statutes:
I. “Qualified investment” means an investment of at least $35,000,000 to design, permit, construct, modify, equip or expand the applicant’s headquarters in the State or, for full-time employees based in the State, to train, retrain or educate them, or pay their student loan debt. The investments and activities of a qualified applicant and other entities that are members of the qualified applicant’s unitary business must be aggregated to determine whether a qualified investment has been made. A qualified investment does not include an investment made prior to the issuance of a certificate of approval or after December 31, 2022.
The Major Business Headquarters Expansion Act (emphasis by author)
The Major Business Headquarters Expansion Act is constructed strategically. The Interpretation I offer hinges on parsing the definition of “qualified investment” which is said to mean an investment of “at least $35,000,000 ….. in the State”, further informed by “The investments and activities……that are members of the qualified applicant’s unitary business must be aggregated”
To understand the intended meaning of the term “unitary” one must look to the definition of a qualified applicant- the applicant must be a business that spans several states or spans the globe. A company with a business located only in Maine does not qualify.
How did we get here?
The historical reason that Paul LePage can sponsor such an act is that Maine was declared to be a centrally managed economy in 1976 during the Longley administration. In those days Maine had the fastest growth, in the nation, in the category of businesses limited in size to 100 employees. In justification of a state take over of the management of Maine's economy, the Maine Legislature cited the difficulties that small businesses have in comparison to larger businesses in finding capital. From the beginning, central management of the Maine economy focused on capitalization, but in the beginning, to get central management's foot in the door, the purpose of central management was portrayed as one of service to the existing small business economic culture. Once established, the purpose of central management became to attract larger businesses to the state.
In 1976 Governor Longley invited the heads of Maine's largest Industries to create a report on developing legislation for statewide economic development management.
The Governor’s Task Force report recommended that two complimentary corporations be chartered by the Legislature, The Maine Capital Corporation, and the Maine Development Corporation.
The statute chartering the Maine Capital Corporation included the following rationalization:
The Legislature finds that one of the limiting factors on the beneficial economic development of the State is the limited availability of capital for the long-term needs of Maine businesses and entrepreneurs. In particular, the lack of equity capital to finance new business ventures and the expansion or recapitalization of existing businesses is critical. This lack of equity capital may prevent worthwhile businesses from being established; it may also force businesses to use debt capital where equity capital would be more appropriate. This creates debt service demands which a new or expanding venture may not be able to meet successfully, causing the venture to fail because of the lack of availability of the appropriate kind of capital.
This impediment to the development and expansion of viable Maine businesses affects all the people of Maine adversely and is one factor resulting in existing conditions of unemployment, underemployment, low per capital income and resource underutilization. By restraining economic development, it sustains burdensome pressures on State Government to provide services to those citizens who are unable to provide for themselves.
To help correct this situation, it is appropriate to use the profit motive of private investors to achieve additional economic development in the State. This can be accomplished by establishing an investment corporation to provide equity capital for Maine businesses and by establishing limited tax credits for investors in the corporation to encourage the formation and use of private capital for the critical public purpose of maintaining and strengthening the state's economy. (emphasis by author)
Definition of a Qualified Applicant in The Major Business Headquarters Expansion Act
H. “Qualified applicant” means an applicant that, at the time an application for a certificate of approval is submitted, satisfies all of the following criteria:
(1) The applicant’s headquarters are or will be located in the State;
(2) The applicant employs at least 5,000 full-time employees worldwide of which at least 25% are or will be based in this State;
(3) The applicant has business locations in at least 3 other states or foreign countries; and
(4) The applicant intends to make a qualified investment in the State within 5 years following the date of the application.
(emphasis by author)
Definition of unitary
1a: of or relating to a unit
The meaning of the applicant’s “unitary” business is stated in the definition of a qualified applicant. The applicant’s unitary business is characterized by “locations in at least 3 other states or foreign countries”.
The Refundable Tax Credit Should Be Called the Role-Reversible Tax Credit!
A refundable tax credit is one in which if no taxes are owed, the public owes the holder the value of the tax credit.
Maine offers many corporate tax exemptions, worth up to 100% of the tax. A refundable tax credit combined with tax exemptions transforms the holder’s role from that of the taxpayer to that of a tax collector.
If there is no intent to manipulate a reversal of roles, there is no reason to qualify the tax credit as a “refundable” tax credit". The qualification implies an intent to make tax exemptions available to the holder, which is usually in a separate act, by design.
3. Refundable credit allowed. A qualified applicant is allowed a credit as provided in this subsection.
A. Subject to the limitations under paragraph B, beginning with the tax year during which the certificate of completion is issued and the tax year beginning in 2020, whichever is later, and for each of the following 19 tax years, a certified applicant is allowed a credit against the tax due under this Part for the taxable year in an amount equal to 2% of the certified applicant’s qualified investment. The credit allowed under this paragraph is refundable.
B. The credit under this subsection is limited as follows:
(1) A credit is not allowed for any tax year during which the taxpayer employs a number of full-time employees based in the State during the taxable year that is less than:
(a) During the first 5 tax years after the certificate of completion is issued, the certified applicant’s number of full-time employees based in the State on the date the certificate of completion is issued; or
(b) More than 5 tax years after the certificate of completion is issued, 110% of the number of the certified applicant’s full-time employees based in the State on the date the certificate of completion is issued. The level of employment for the tax year is measured on the last day of the tax year; and
(2) Cumulative credits under this subsection may not exceed $16,000,000 under any one certificate. (emphasis by author)
2% of What?
The “refundable” tax credit is worth 2% of the certified applicant’s qualified investment, subject to limitations of Paragraph B.
Paragraph B does not limit investments to investments in Maine. The statute states only that the qualified investment must be “at least” $35,000,000 invested in Maine. 2% of a qualified applicant’s unitary business investments include investments in “at least 3 other states or foreign countries”. There is no qualification for “at most”, other than the 16 million dollar limit to the credits.
16 million is 2% of 800 million. A corporation must invest 35 million in Maine and 765 million in unitary investments anywhere in the world. If no taxes are owed in Maine, it will result in the Maine taxpayers owing the corporation 16 million dollars for creating 1250 jobs in Maine. Potentially, simultaneous corporations can collect on the refundable credit in a common period if there is no one of sound mind at the helm of Maine State Inc, to put a limit on how much the Maine taxpayer will finance the global economy. Considering that there are no stipulations on where the unitary business locations are in the world, they can be anywhere, even in corrupt or totalitarian states. It's only about the money.
The investments must be made by the end of 2022 unless extended by the Maine Legislature, so the intent is to rapidly change Maine's economy in a short period, for the benefit of large global corporations, not the small business economy that has more difficulty finding capital than larger companies whose capitalization is being taxpayer-subsidized by the people under the central management of the economy, in enactments such as the Major Business Headquarters Expansion Act.
Through enactments such as The Major Business Headquarters Expansion Act, the workers, and smaller businesses, across the world, are capitalizing the class that owns the major means of production of the global economy.
In August of 2019. Maine Wire, a conservative publication, uncharacteristically declared “Mainers Cannot Afford Corporate Welfare”
The Maine Wire article references the description of the act on the Department of Community Economic and Development website. There, the refundable tax credit is referred to as a “credit”, throughout until the last section on reporting requirements. The qualified investment is left undefined.
The Bangor Daily News reports...Not Much!
The first company to take advantage of The Major Business Headquarters Expansion Act is Idexx, True to form, the Bangor Daily News reports the refundable tax credit as a standard tax credit:
Giovanni Twigge, chief human resources officer, said the partnership with the state and city has been “mutually beneficial” and will allow Idexx to “help grow Maine’s economy.”
The Major Business Headquarters Expansion Tax Credit was created two years ago to benefit Idexx and support the company’s expansion. The sponsor, Senate President Troy Jackson, said the door is open to other companies to take advantage. Veterinary company to get tax breaks once its new HQ opens in Westbrook
News Center Maine reports that IDEXX will collect the full 16 million refundable tax credit limit. Westbrook will benefit as all of Maine carries the burden of capitalizing a global corporation. The words "help grow Maine's economy" are trickle-down effect rhetoric, ignoring that the wealth divide has only expanded since the 1970s when Maine became managed a centrally managed economy, evidence supporting that there is no trickle-down effect, which has also been established but ignored in studies on the Pine Tree Zone tax exemptions.
The 2% of Westbrook’s global investments equates with almost 45% of the required investment in Maine.
The Major Business Headquarters Expansion Act transforms Maine into a global corporate state. Maine taxpayers are mandated to finance the global corporation's investments anywhere in the world. just as taxpayers are expected to finance the operations of a state.
Professor Thornberg Offers A Sound Idea
….. Moreover, says Thornberg, governments should not be allowed to pick and choose — ‘I’ll give subsidies to this company and not everyone else.’ That doesn’t seem kosher. It’s a corrupting influence,” he says. Thornberg would like to see a federal law that prohibits cities, counties and states from awarding individual entities special perks. The Headquarters Checklist: How do Companies Pick a Location- Wharton University
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