And Weapons Manufacturers Get Subsidies on Top of DoD Contracts
Michigan gives some of its biggest polluters hundreds of millions of dollars in tax exemptions; a little-known provision in the CHIPS & Science Act will give semiconductor companies even more tax dollars than is widely believed; and the role of state and local subsidies in weapons production.
Arlene here, feverishly writing names of companies that belong on the Naughty List. It’s long.
But first, thank you for the outpouring of support as we celebrate our 25th Birthday! We’re proud to have worked with so many of you.
Big Polluters Defund Segregated, Low-Income Communities in Michigan
Michigan’s tax exemption for pollution control equipment costs local governments hundreds of millions of dollars every year in foregone revenue. While meant to improve corporate environmental compliance, these massive tax savings have primarily benefited some of the state’s worst repeat polluters, including DTE Energy.
Here’s the skinny: Michigan’s State Tax Commission is authorized to permanently exempt pollution control equipment from sales and property taxes, both of which exclusively fund public education and local government. And get this: the same companies are often repeat offenders polluting majority-Black and Brown communities.
No other property tax abatement in Michigan empowers the state to preempt local government power, and the impact is considerable.
Between 2010 and 2021, these pollution control exemptions cost localities $2.2 billion; $1.5 billion of that was in foregone property tax revenue.
Read Good Jobs First Jacob Whiton’s report, which includes how Michigan can remedy this harmful situation.
This is How American Taxpayers Subsidize International Conflict
More wars means more sales and profits for weapons manufacturers, like RTX (formerly Raytheon).
Not only do these military outfitters benefit from weapons purchases around the world, but they also receive millions of dollars in subsidies from state and local governments to produce them.
It’s hard to say how much in total these companies get because transparency is so poor. For example, Florida spent an “undisclosed” amount on Lockheed Martin’s highly-demanded guided missile defense systems from 2015 to 2018.
And the subsidies don’t always lead to new jobs. By 2024, for example, New Jersey will have spent $107 million in taxpayer dollars in a deal just to retain, not create, 250 jobs after Lockheed Martin decided to move operations from Moorestown to Camden in 2014. With a net yield of zero jobs, it becomes hard to see such deals as anything other than wasteful corporate welfare.
Read Good Jobs First researcher Nya Anthony’s piece on why weapons producers should be last in line when it comes to government handouts.
48D: A Holiday Gift to Semiconductor Manufacturers
Under a provision of the CHIPS and Science Act, factories making semiconductors will receive billions of undisclosed dollars from the U.S. government. Thanks to the Act’s Advanced Manufacturing Investment Tax Credit, also called the 48D tax credit for its section in the Internal Revenue Code, chip makers are eligible for federal corporate income tax credits they can use or cash out.
The 48D tax credit is very generous – 25% of what the companies spend on new manufacturing capacity. We conservatively estimate the 48D credit will cost the U.S. Treasury between $40 and $50 billion, far more than the $24 billion initially estimated by Congress’s Joint Committee on Taxation.
Ten manufacturing facilities will receive over a billion dollars each.
Despite this massive taxpayer support, semiconductor facilities aren’t required under the CHIPS Act to provide permanent workers living wages with benefits. That’s a huge problem.
Another problem with 48D? The credits are “as of right,” meaning their costs will not be disclosed publicly, and neither will the names of recipients.
But a remedy remains available. States and localities can add conditions to companies seeking to build in their backyards. They can require the jobs to be permanent, prevailing wage or better, and with benefits.
Good Jobs First’s Judith Barish has more here.
Until next time.