Hey, 2010 candidates: Georgia needs a new approach to jobs

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.”

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.

37 comments Add your comment

David Carradine

May 26th, 2010
10:52 pm

All that pebble snatching sounds suspiciously like an old episode of Kung Fu” with David Carradine.

Snatch the pebble from my hand grasshopper.

Bill

May 26th, 2010
11:07 pm

Kyle, your UGA background shows!! As usual, you have a column that makes no sense!! The only good thing that can be said about your articles is that they are not the Jim Wooten partisan drivel!! Since you are the AJC “conservative voice”, I really hope you find a way to write articles that make sense and attract a following. This type of amateur journalism is not what we need.

Regards,

jm

May 27th, 2010
12:45 am

Well, if we had a sensible immigration policy where the top foreign born graduates of American colleges are given the opportunity to put their skills to use here, instead of the policy that seems to favor whoever is willing to work in the factories and farms for the lowest wage. I just love the parallels between the useless war on drugs (lock up the addicts but don’t touch the financial companies that launder the drug profits) and our current immigration “war” (punish those looking for a better opportunity but don’t touch the ones doing the hiring).

As for that Kia plant, I wonder if the number of “new” jobs it is bringing is equal to the ones lost when Ford closed the Hapeville plant and GM closed the Doraville plant.

Gerald West

May 27th, 2010
7:20 am

Good article, Kyle! You opened with an interesting bit of observation to introduce the subject, then proceeded to develop the main point and conclusion. And, you didn’t lapse into “conservative” and Republican bull despite your duty to serve as the contrarian of the AJC. Congratulations!

We should, of course, rescind any nuisance paperwork and taxes that discourage businesses from starting or moving here. We should also make adventure capital readily available. A clever way to do this is to set up a Georgia VC Fund as a self-sustaining, non-profit public corporation directed by senior business and engineering professionals. The purpose of the fund would be to offer low-interest loans for promising ventures in our state. The fund could be sustained and enhanced by the proceeds from two lavish gambling casinos, in St. Simons and Marietta, to be set up by the state, but built and operated by Harrah’s. We’d be able to fleece Florida-bound tourists (and local fools) for a good cause: job creation in Georgia.

Less imaginatively, the VC Fund could be supported by a 1% income tax surcharge.

Let’s hope that someday voters in Georgia will come to realize that investment, not tax cuts, fuels development and good jobs. We can do so little individually; we can do so much together through taxes that are channeled into development.

jt

May 27th, 2010
7:39 am

The candidate with the plan to do just that is our winner.

Government can do nothing to create a real job, except get out of the way.

One plank of the Libertarian platform————————

“We distinguish between de facto monopolies where competition is possible but absent, and coercive monopolies. We condemn all coercive monopolies, but recognize that government is their primary source, through its grants of legal privilege to special interests in the economy. In order to abolish coercive monopolies, we advocate a strict separation of business and State. “

jt

May 27th, 2010
7:44 am

There will be no relief coming from the R & D party. (unless you are politically connected). This makes it hard for real business people who cannot tolerate lawyers and politicians.

Also, there is this———————————————-A libertarian Plank—————-

In a free state, government should not be allowed to victimize any individual or interest for the benefit of any other. Therefore we oppose each and every government subsidy — to business, labor, education, agriculture, science, the arts, sports, broadcasting, or any other special interest. The unrestricted competition of the free market is the best way to foster prosperity.

The loans of government-sponsored enterprises, even when not guaranteed by the government, constitute another form of subsidy. All such enterprises must either be abolished or completely privatized.

Relief or exemption from taxation or from any other involuntary government intervention, however, is not a subsidy; we call that freedom and we look forward to the day when freedom is extended to all.

DEWSTARPATH

May 27th, 2010
8:00 am

jt

May 27th, 2010
7:44 am

There will be no relief coming from the R & D party. (unless you are politically connected). This makes it hard for real business people who cannot tolerate lawyers and politicians.

- I believe there is some truth to that last statement; however, I don’t believe that
economic Darwinism in the form of “unrestricted competition in a free market” is
true in all industry models. Instead of relief coming from the Republican and
Democratic parties, perhaps progress from research and development can deal
with problems with investment and infrastructure that the two warring factions
cannot (or will not) address.

Disgusted

May 27th, 2010
8:18 am

I was following your line of reasoning until I got to this zinger:

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.

Whoa! So the argument is that Georgia should loosen restrictions and let the fat cats raid the public pension funds? You know, there’s a sound reason that many financial institutions simply will not lend to start-up operations, no matter how compelling the arguments of the founders are. The bottom line is that many—in fact, most—of these ventures fail.

And who’s left holding the bag when these borrowers of public pension funds bog down? Obviously, those who’ve put their faith in the promise that the pensions they’ve worked so long to collect will be there, but just as importantly, the taxpayers who will have to be the guarantors.

No thanks. We already have enough subsidization of private ventures. We don’t need to let the owners of them dip their beaks even further into the public trough.

jt

May 27th, 2010
8:20 am

DEWSTARPATH

Perhaps.

Regardless, even having a viable third party is no panacea. Your Research & Development will still be politicized.

The trick is to get politicians(government) out of the aspects of our life or economy that they are currently unnecessarily in. Their entrenchment is astounding.

Build a wall between government and business if you will. Only the libertarian party espouses this.

Gator Joe

May 27th, 2010
8:59 am

Kyle,
You left out, “and I’m a Republican” from your opening sentence. Primary reasons for companies to locate here are, hostility to unions and cheaper labor (read: low wages), as in other Southeastern states.
PS
You and your companions were fortunate to visit Antartica!

Gator Joe

May 27th, 2010
9:04 am

Sorry, I left “c” out of Antarctica in my post.

Lewis

May 27th, 2010
9:11 am

Sensible tax reform could provide reasons for businesses to stay in and relocate to Georgia. However, very few companies will come and many will leave if Georgia’s roads are impassable, public transportation is weak, schools erode, the air is polluted, the water supply is uncertain, and the quality of life declines. It is hard to see cohesive efforts at the state, county, and local levels vigorously to address these pressing challenges.

David S

May 27th, 2010
9:16 am

It is absolutely whether we are a high tax state or a low tax state. We must be a low if not no tax state for all businesses and frankly for citizens too. We must also slash the regulations, fees, permits, and everything else that impedes people who are just trying to make a living and create jobs. The nice part about cutting out the government is that we can eliminate all of those jobs and the costs that go with them. Then the productive sector can fluorish without the burden of the non-productive sector dragging it down.

There is absolutely nothing wrong with attracting businesses to GA with a better business-friendly environment. Maybe other states will follow suit and all states can be business and citizen friendly once again. Frankly if states like Massachusettes feel that its ok to tax and regulate their citizens and businesses, they deserve to loose both.

The ever growing number of citizens and businesses that are leaving this COUNTRY for greener pastures just shows how horrible government at all levels has made it for everyone.

Freedom is attractive. There should be no taxpayer financed incentives, but cutting the burden all around benefits everyone (except of course the parasites, but they need to move to better “host” states anyway).

Dearie Smith

May 27th, 2010
9:55 am

Bill, I am wondering what made this post difficult for you to understand. It is clear cut and makes sense to me. How much clearer could Kyle have made it?

Emily

May 27th, 2010
10:02 am

@Disgusted: Heard it!
@David S: No tax? For anyone? Are you going to volunteer for the fire department? Are you going to personally fincance the incentives for business to come to Georgia? I just don’t understand the logic of how we can maintain the status quo (or grow beyond it) without paying taxes.

@Kyle: Dumb-Tax. Ha.

Kyle Wingfield

May 27th, 2010
10:04 am

jm: Agree re: high-skilled immigrants/U.S. college grads.

jt: I favor making the tax code fair and attractive to all who want to invest in Georgia, and not just offering incentives on an ad hoc basis. In my mind, my approach makes any particular company less beholden to the government. What do you disagree with?

Disgusted: In most states, we are talking about a very, very small percentage of the total funds. This idea would pose much less of a threat to pension funds’ solvency than the chronic over-promising and under-funding they (generally speaking) face.

Gator Joe: You may be right about the unions/pay angle — in the past. But that will not suffice as a competitive advantage in the future. (And yes, we were very fortunate indeed to make that trip.)

Kudos2Kyle

May 27th, 2010
10:07 am

I thought penugins only live at the equator. Where is Antartica? Is it near the South Pole? Which pole has all the Polar Bears and eskimos and stuff?

This penguin analogy certainly finally explains the Goldman Sachs synthetic derivative scandal so that even a zookeeper can understand it. Kudos to Kyle.

Kyle Wingfield

May 27th, 2010
10:07 am

David S: Here’s what I’m trying to get at: With our very complex tax code, it is possible to be low-tax in a number of areas while masking high taxes in others — thereby having an unattractive tax climate even if we could credibly be called a “low tax” state. I also favor simplification, but that’s another column (not to mention a long, drawn-out political fight, most likely).

In the meantime, why not recognize that making ourselves more tax-competitive on an ad hoc basis is only allowing us to tread water — at best — when we could be improving things for all job creators, even the ones that don’t have the attention of elected officials?

Hillbilly Deluxe

May 27th, 2010
10:13 am

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.

How many of the 7 went to other states and how many went off shore? Does this 7 include startups that failed, as most do, even in good times?

Morrus

May 27th, 2010
10:18 am

Curiously, in a supposed anti-incumbent year, most of the departing are not retiring but seeking higher office. We may recycle more than we replace. The bad news is that a frustrating 114 seats still have but one contestant. Two of them aren’t even incumbents, meaning they will affect state policy without being vetted by voters. And I have to think that we’d be better off if many had run instead for the Legislature — and cut down on the number running unopposed. Georgia’s problems are numerous. They aren’t going away. There’s too much stale thinking at the Capitol, on both sides of the aisle. New voices would be welcome.

scrappy

May 27th, 2010
10:28 am

No dumb taxes is a good idea, but companies aren’t going to attract good employees from other areas without improved transportation, water, and schools.

Come work for me! But, you may not be able to take a shower, it may take you 3 hours to get to work each day, and your kids will be in the 48th greatest school system in the country!

Candidate that improves transportation will get my vote.

Kyle Wingfield

May 27th, 2010
10:32 am

Hillbilly: Not sure about the 7-of-10 figure; I didn’t see a figure in the study saying what the total number of firms were in absolute numbers. However, I did note that of the 129 startups involved in the biggest VC deals — which probably includes the startups most likely to succeed, and those we really need to keep — only six failed, versus 51 that moved.

Of those 51, eight moved overseas and 43 moved to another state. California got 13 of them, NY/NJ combined got eight, Florida got seven, and the other 15 were dispersed among 11 different states.

Jess

May 27th, 2010
10:56 am

Good article. The one big thing not being discussed here is an available and educated work force. Although the Metro area can hold their own in providing engineers and college educated workers, the quality of their high school graduates is seen as very poor. This image may or may not be true for the entire area, but employers look at statistics, and these tell them we have a problem in suppling a well educated group of high schoolers.

Also, for companies moving to Atlanta, I can tell you the number one thing they look for is an area where their are few unions. This gets you on the list. They then look at tax breaks etc.

Taxbreaks

May 27th, 2010
11:08 am

So the criteria for Corporate moves to Georgia are: Unions. Taxes Educated workforce.

What about Public Transporation? Water supply? Climate? Red state of Blue state?

Old Man

May 27th, 2010
11:12 am

@ Bill
May 26th, 2010
11:07 pm

To be so insulting to the thousands of UGa grads, people who probably provide you with a job, is really not very smart. Your insult, void of real criticism, indicates you are a lonesome alcoholic who probably lives off and with his parents.

Just because YOU don’t understand the article doesn’t mean it makes no sense. I find it spot on. Maybe you should go outside on this beautiful day and learn how to say something nice about somebody somewhere. You can get your “conservative” message all over the internet, radio, and TV, 24/7, coast to coast.

Mr Wingfield is bringing sorely needed pragmatic arguments to the conservative debate, here with a creative analogy from nature, and backed by verifiable citations. And it’s about time!

Disgusted

May 27th, 2010
11:13 am

In most states, we are talking about a very, very small percentage of the total funds. This idea would pose much less of a threat to pension funds’ solvency than the chronic over-promising and under-funding they (generally speaking) face.

Talk to the Secretary of State of West Virginia about what happens when public pension funds are invested in risky enterprises like start-ups. The entire state pension fund went belly-up, and the state is still trying to recover. The percentage of funds invested is irrelevant; the fact is that public pension funds can’t be devoted to risky operations the way a union’s pension funds frequently are.

jt

May 27th, 2010
11:25 am

“jt: I favor making the tax code fair and attractive to all who want to invest in Georgia, and not just offering incentives on an ad hoc basis. In my mind, my approach makes any particular company less beholden to the government. What do you disagree with?”

You wrote-

“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.”

I disagree with using the tax code for incentives or disincentives. That is called social engineering and it never works when politics are involved.

The tax code should be blind and everyone should pay. (Consumption tax).

Build that wall between the state and business.

Vote libertarian.

Jefferson

May 27th, 2010
11:56 am

Corporate wellfare is BS. They should pay their fair share of the profits earned with Georgia labor. The workers pay their share.

Base

May 27th, 2010
12:06 pm

What is the Sonny approach to job development?Lose two auto assembly plants replace it with one smaller.

Jess

May 27th, 2010
12:11 pm

Base,

Perhaps you could explain how Sonny had anything to do with losing two auto mfg. plants.

Base

May 27th, 2010
12:39 pm

Jess:
Sonny made no attempt to keep them when they announced they would close.They were union!

Swede Atlanta

May 27th, 2010
1:08 pm

David S

I agree that a restructured corporate tax framework could provide ONE reason for a business to relocate or stay in Georgia. But let us not lose sight of the fact that the presence of a business in Georgia most often drives consumption of public resources in the form of services used by employees. These include roads, schools, water and other infrastucture.

So I’m not in favor of simply reducing corporate taxes to atract and retain business without ensuring that before the profits go to shareholders and owners, the business is contributing toward the cost of operating in Georgia, i.e. taxes.

Further I support a review of licensing and regulations but you almost suggest we dismantle this entire framework and let businesses “have at it”. I’m afraid this is exactly what has contributed to the current Gulf oil disaster albeit at the federal level. Licensing, regulation including monitoring and inspection is necessary to provide not only for the public safety but the safety of employees.

Jefferson

May 27th, 2010
1:19 pm

Kia will be union soon.

Azazel

May 27th, 2010
1:21 pm

Get of of corporate thinking box!! New govenor should legalize mariguana and cultivate it in south Georgia and create medicinal markets, jobs + tax revenues; Consider State owned utility that produces energy from solar farms again in south Georgia more jobs + cheaper elecricity.

Tax revenues from Canabis can support new energy initiatives and the eduacation system necessary to build them.

David S

May 27th, 2010
4:03 pm

Kyle,

I’m in full agreement with your followup. Yes, it is disgusting that we screw existing businesses just to pander to government friends or those we wish to “woo”. That essentially is the basis of “Redevelopment”. In this, existing businesses pay higher fees, taxes, etc. to pay off the bonds that government floats to demolish existing businesses to make way for their friends. In the end, the area may look nicer, but the impact of the horrible property and business taxes or even zoning and labor laws are never examined for their contribution to the decline of existing businesses.

I just wanted to make the point that there is a distinction between high and low and that every state’s goals should be to be on the WAY low side for everyone.

Kyle Wingfield

May 27th, 2010
4:13 pm

Fair enough, David S.

Diane

May 28th, 2010
4:53 pm

I find it interesting that you want to risk monies that are not really the state’s. The funds are the retirees. Long years of working and contributing to the fund by the employees built the fund and you want it in risky ventures. What will the retirees get for risking their future? Who will really benefit from this? From having dealt with companies coming in, hiring people and when all the tax breaks by the state and local communities were over they left for new tax breaks. If the venture capital is so wonderful then let Bank of American or who ever do it. You really need a better understanding of the entire situation and not just the quick fix as you see it.