Boondoggle | by Pat Garofalo
Wilmington, Delaware, is home to the U.S. consumer banking division of the British bank Barclays. Last year, Barclays moved 500 jobs from that location to a new “hub” in Whippany, New Jersey, receiving about $40 million in tax breaks over 10 years from the Garden State.
Now, Delaware is giving the bank new funds to create 300 jobs at its Wilmington location — only they’re worse gigs. This churn is a great illustration of how corporations are the only ones who win the subsidy competition between states.
Big banks tend to set up shop in Delaware because, historically, it has very lax incorporation laws and is a very favorable place from which to launch financial products such as credit cards, because it has no caps on interest rates. Back in 1981, Gov. Pierre duPont IV, of the duPont family fortune, incentivized major banks to move to Delaware by explicitly lowering taxes for those that booked more profits in the state, while keeping them higher for smaller financial firms, and allowing banks to impose a whole host of fees to nickel and dime customers.
Fast forward, and the state is still doing favors for major banks. Its Council on Development Finance recently approved a $2.5 million grant for Barclays to create 300 call center jobs. They will pay roughly $32,000 per year, reportedly less than the information and technology services positions that New Jersey took via its own $40 million giveaway. (Check out my coverage of New Jersey’s recent investigation into its own corporate tax shenanigans here and here.)
“It’s a gift card, a debit card, that we give” to big corporations, State Rep. John Kowalko told me. He noted the money was “not just unrecoverable tax revenue, but also costs the taxpayers money because most of them, when they get around that [pay] level, if it’s a multi-person family, end up qualifying for food stamps and Medicaid in some cases.”
Barclays needs new workers to handle increased calls from customers due to the coronavirus pandemic, and admitted that it would have created the jobs without any public money. Look at this quote:
[General Counsel Larry] Drexler noted that Barclays did not wait to learn about the outcome of its $2.49 million Strategic Fund request before the state’s Council on Development Finance (CDF) on June 29, with a training class getting underway the same day. It has about 200 job offers already made, he added.
He seemed to mean this positively, as a reflection of the bank’s commitment to Delaware. But it shows that the incentives had nothing to do with the bank’s decision to place new positions there. Barclays still has 1,500 employees and a major facility in Wilmington, so it makes perfect sense to put new workers on that campus, rather than starting from scratch somewhere else, incentives or no incentives.
And yet the state coughed up money anyway, to get back a lame fraction of what was lost just a year ago. The lone no vote on the council that approved the giveaway was a member of the state house who said he wanted to help companies with “a better history than laying off Delawareans.”
Kowalko — who is part of a coalition of lawmakers across the country trying to advance a no-job-poaching pact — likens all this to the state’s taxpayers constantly passing through a toll booth and having to pay corporate overloards to keep on traveling. “They take the money, they pocket it, and it’s gone,” he said.
I think it’s more like an economic policy merry-go-round we’re all stuck on: Taxpayers are paying to go in circles, only each subsequent ride is a little worse, because the machine is getting older, the seats are getting more uncomfortable, and the music is getting more annoying. It’s time for public officials to pull the plug.