Last week, news broke that VF Corporation, parent company of The North Face, Timberland, and JanSport was relocating its corporate headquarters to Denver from Greensboro, North Carolina, bringing 800 jobs with it. While it is fine to encourage, and cheer on, economic growth, there appears to be no good reason why a sweetheart public subsidy should be part of the deal.
While Colorado is a perfect cultural fit for the maker of outdoor apparel, the move came with $27 million worth of strings attached. That’s the size of the Job Growth Incentive Tax (JGIT) credit the Colorado Office of Economic Development and International Trade (OEDIT) promised VF in return for the move.
The taxpayer subsidy will be paid out over 10 years, and comes in the form of a reimbursement for the company’s portion of the FICA tax paid on the jobs that come with the move. So Colorado taxpayers from across the state will be paying roughly $3400 per year per job brought to Denver.
Ironically, that includes the residents of Steamboat Springs, who will see 70 jobs leave their town and migrate to the state’s capital.
In order to qualify for the taxpayer gift, the average salary of the jobs VF creates in Denver has to exceed the overall average salary in Denver itself. VF claims that average will be in excess of $187,000 per year.
However, OEDIT uses the mean not the median average for this calculation, making it vulnerable to skewing by a relatively small number of executive salaries. A median average, where half the people earn more and half the people earn less, would be more representative of salaries as a whole.
OEDIT was celebrating the move as a win for its JGIT program, but it’s unclear why the award was financially necessary in the first place. The company reported Operating Income of over $1.5 billion in 2017; the annual Colorado taxpayer contribution to that is less than two-tenths of one percent. The company could obviously afford to move to Colorado entirely on its own dime.
Colorado already scores high in any number of business climate surveys, from CNBC’s best states for business to WalletHub’s best places to start a career. There’s nothing the matter with the state or a city government pointing this out to prospective immigrants, but continued high rankings should sell themselves without the additional vigorish of taxpayer subsidies.
Besides which, the Colorado Constitution specifically bans giving away public dollars to private companies in the first place. Article XI, section 2 is clear: “Neither the state, nor any county, city, town, township, or school district shall make any donation or grant to, or in aid of … any corporation or company.”
Colorado courts used to enforce this clause, but today they ignore it, saying that the clause doesn’t apply if the government claims that the corporate welfare has a “public purpose,” like helping the economy.
And the company also announced that it would pass the tax credit through to its corporate VF Foundation, earmarked for projects here in the state. Far be it from us to gainsay corporate contributions to the state’s nonprofits, but such an assertion is going to be almost impossible to verify. How much better to let Colorado taxpayers keep that money and contribute it to causes of their own, diverse choosing.
But then, that would also mean less work for the 67-employee, $109 million OEDIT office.
Joshua Sharf is a fiscal policy analyst at the Independence Institute, a free market think tank in Denver.