Saving the Day for Corporate Welfare

Which would you rather see the state of Missouri give greater priority?
(A) A new program using tax credits to provide seed capital to startup businesses that otherwise might not get off the ground.

(B) An existing program to give large companies tax credits for increasing their research-and-development (R&D) efforts, which otherwise would have to be funded from those companies' profits.

Let's see. Venture capital or corporate welfare? Create new high-tech jobs or protect old high-octane profits?

It's a tough call, isn't it? Especially with all those starving CEOs struggling to pull down a lousy $51.2 million, like Monsanto's Robert Shapiro had to settle for last year.

Sure, innovative small companies are the future of the world economy, and the jobs those companies provide are the future of places like St. Louis. Sure, ours is fast becoming an outpost town for giant corporations -- as opposed to a headquarters town -- and thus can no longer count on manufacturing employment to assure long-term economic health.

And, sure, Missouri was outspent by neighboring Illinois in venture-capital-fund commitments by the slight margin of $460 million to zero in 1997. (This according to the National Venture Capital Association annual report.)

But, hey, what good is state government if it can't siphon taxpayer dollars to the treasuries of large corporations as a token of the public's gratitude for them not moving to another state? You would go for corporate welfare over venture capital any day, wouldn't you?

Wouldn't you?
Well, your state government did, just last week. A proposal to set up a $10 million-per-year venture-capital fund died in the Senate when Monsanto and other large corporations wouldn't agree to "allow" the state to cut in half the R&D program (also $10 million per year) with which it annually reduces its tax bill.

Afterward -- and after Boeing announced 7,000 layoffs in the state -- the Legislature gave the state economic-development department half of what it asked for and set up a $5 million-per-year venture-capital fund.

But, of course, it left the sacrosanct R&D program untouched.
Final score: $10 million for corporate welfare; $5 million for venture capital. At least it wasn't a shutout.

All the high-school civics teachers in the area ought to use this as a case study in power politics. The lesson: You can have all the innovation and good intentions in the world, but taking back a tax break from a giant corporation is like taking raw meat from a growling dog.

Look no further than our Monsanto-friendly daily newspaper for an insight into just how effectively the big dog growled:

"Proposal to provide money to start-up businesses falls through," the Post-Dispatch headlined its back-in-the-B-section coverage of the issue. "Deal with Monsanto to fund the plan can't be reached."

Wait a minute. Why should state government have had to make a "deal" with Monsanto or any other corporation to shift tax credits from one economic-development program to another?

It's bad enough to hand out corporate welfare to companies that don't need it -- presumably because "everyone else is doing it" -- but it doesn't stop with the handouts. Now, it turns out, the Monsantos of the world essentially own these programs, and their state benefactors must have their blessing before daring to shift resources to another purpose.

That, of course, is not exactly how Monsanto and its defenders would characterize it. Dick Fleming, president of the Regional Commerce and Growth Association (RCGA) said the company "bent over backwards" to make the startup-capital program work and that it was not to blame for disagreements that ultimately killed legislation that would have cut the R&D program.

On the other side, Tom Sullivan, policy-development director for the state Department of Economic Development, said, "It became clear that various lobbyists had contacted legislators and we weren't going to get the bill passed. These people would not accept cuts in the (R&D) program."

What everyone agrees on is that a broad coalition of business and academic groups (including the RCGA, which considered the set-up program a top priority) were squarely behind a four-year, $40 million venture-capital program. Then came the bad news from state budget officials, who maintained that it was twice as much as the state could afford.

Joe Driskill, state economic-development director, told me Tuesday he was "forced to make a decision on the economic margin."

"I needed to find $20 million over the next four years, which is why I made the decision to cut the (R&D) program in half," Driskill said. "I had hoped to make the case to (the large corporations) that this would help a lot of startup businesses that arguably could have a very positive impact in the St. Louis area and across the state, and therefore would help the companies themselves. Obviously, they didn't agree."

The big boys apparently were going along with cutting the R&D program, but only if they were allowed to carry credits forward 15 years and, more important, if they were able to receive cash payments for 85 percent of the tax credits if those credits were more than the companies owed the state.

Cash payments? Now that's corporate welfare. And that's where the "deal" fell apart, leaving the R&D program safely intact.

Next Page »