Here’s what I need to hear from the gubernatorial candidate who wants my vote: “I have a plan to make Georgia more than a jobs penguin.”
Ten years ago, I sailed with three fellow UGA undergrads on a short study abroad to Antarctica. On one landing we had a couple of hours to observe penguins in the wild.
It was fascinating. One of the birds’ chief activities went like this: Patty Penguin waddled over to Paul Penguin’s nest of pebbles and stole a rock with her beak, returning home with it. Paul, perturbed, rose from his nest and stole a pebble from Peyton’s place. Peyton then robbed Peter to repay himself for Paul. And on it went.
I’m often reminded of this scene when it comes to programs designed to bring jobs.
In with the old . . .
It’s nice to land a big new employer, as with NCR’s decision last year to relocate its headquarters from Ohio to Gwinnett County. But we’ve also seen Georgia-based companies in recent years move offices or factories out of state or country.
I’m all for competition, but it seems to me that job creation by poaching makes us and other regions like those penguins: shifting things around, but not really adding anything new.
Sometimes our recruitment efforts are not to take another region’s existing jobs but to be chosen for a corporate expansion; think of the Kia automotive plant in LaGrange. In this case, we’re not trying to take pebbles from other regions.
We are, however, taking from others in another way. To compete with other potential sites, we offer the expanding company a package of incentives, often with a centerpiece of tax breaks. (We also do this with outside companies that are relocating.)
And what if you’re a business that’s been operating and growing in Georgia all along, watching these newcomers get tailor-made tax breaks, continuing to compete with firms in neighboring states without getting relief on taxes, like the inventory levy, that they don’t face?
Well, you might feel as if someone’s getting one of your pebbles. Before long, you may look around to see if anyone will give you a reason to move.
. . . and out with the new
The most mobile of these homegrown companies are startups — young firms without strong ties to their place of birth but with a great need for access to capital. In Georgia, and specifically in Atlanta, some angel or venture capital is available. But the really deep wells are elsewhere.
And so we’ve watched a staggering number of these startups leave. A recent study by two Georgia Tech researchers found a steady outflow of Georgia startups, including seven out of 10 such firms that received venture capital (VC) investments a decade ago.
Of the 129 Georgia firms involved in the biggest VC deals from 1997 to 2007, just six have folded. But 51 of them, or 40 percent, have moved elsewhere. In a knowledge-based economy, entrepreneurship and innovation are natural resources — and we are watching idly as they leave our borders.
There are a number of factors at play, but it’s inescapable that we are losing these companies while remaining the lone state in America whose public pension funds can’t make VC investments. We finally took a first step, in HB 1069, passed last month, to provide tax incentives for angel and VC investors. But it’s only a first step.
More of this kind of broad-based tax reform, rather than a patchwork of pitches to each company that comes calling, will help create a good overall environment rather than a single opportunity.
It’s not about whether we are a high-tax state or a low-tax state. We need to stop being a dumb-tax state. That’s how we get out of the pebble-moving business.
The candidate with the plan to do just that is our winner.