Delta-NRA fight underscores fallacy of corporate giveaways

The politicians of Georgia, ticked off that Delta has joined the list of companies that have cancelled discounts to members of the National Rifle Association, have unwittingly revealed what a giveaway unnecessary tax breaks to corporations are.

Otherwise, the handouts from the public trough to that state’s largest private employer might merit a more sobering discussion than the pandering to a base that the pols engaged in yesterday.

Ostensibly, tax breaks are to provide jobs, or keep employers around. But Georgia is gambling — and it’s a pretty good bet — that denying the public cash won’t change a thing nor endanger Atlanta as a home to Delta. That’s the exact opposite of the usual Republican economic philosophy.

The governor had said the $40 million break on sales tax and fuel purchases for Delta was needed to keep Atlanta competitive with other airline hubs.

Or what? It’ll move to Minneapolis and rename itself Northwest Airlines?

Delta isn’t going anywhere with or without the tax breaks.

“We helped Delta out with this tax cut back when they were struggling. That’s what partners do,” sad Sen. Rick Jeffare, who’s running for lieutenant governor. “This time, they attacked 100,000 Georgians while asking for $40 million of their tax dollars at the same time. That was wrong and I’m glad it was stopped short.”

Delta, meanwhile, is clumsily trying to out-red its critics in a bid to get the taxpayer cash.

But Delta has no real leverage here even if it has a stranglehold on the state and its politicians because ultimately what Republicans have done is revealed the foolishness of the tax breaks (for the firmly entrenched) in the first place.

In its hissyfit, the GOP has finally acknowledged it.

In the end, the social media uproar will blow over, travelers’ indignation will last right up to the moment they need to get somewhere, and Delta will get its tax break right after the election when there are no more easy points for politicians to score.

But for a moment, it was exciting to see politicians say “no” to the shakedown.

  • Delta is staying put because the economics of geography say so. Politicians may bloviate and scold, but try as they might to change the way things are naturally inclined to work, they are just howling into the wind.

    • Mike Worcester

      And logistics. Can you imagine what it would take to move not just the corporate hq (probably the easiest move of any), but the maintenance and hub operations out of Hartsfield to another aeroport somewhere? Who would even have the room to absorb Delta’s capacity, without a significant addition?

  • jon

    Georgia politicians say “for every one of ours you attack*, we’ll change policies to ensure we also end up with them being unemployed.” (assuming tax breaks actually work to create jobs…)

    Anyone know how many NRA members work for delta? and how many of them have quit with righteous indignation over this issue? is it more than none? I suspect people value their livelihood over a discount for a plane flight**, and perhaps even over their guns… (though on the internet people keep telling me that I can pry their gun out of their cold dead hands… which suggests they value their gun more than their own life… though I think if push came to shove they’d update their opinion fairly quickly.)

    *by not giving them discounts.
    **and if you work for delta you probably get a better discount than the NRA got anyhow.

  • MikeB

    It exposes the fallacy on the need for needless tax giveaways but also offers incentives to corporations to bid for tax breaks by getting involved in political and social issues. “We offered a discount to X so give us a tax favor for it”. it brings the graft more out in the open, and normalizes it.

  • Jay T. Berken

    This is one thing that I am pretty proud of the state of Minnesota, at least face value, that they are in the mindset of not giving many big tax breaks to companies. The whole Amazon thing was and is a s**tshow. Although the state has been bowing to the winds of their sports teams to shell of the goods.

    Being at the local government level, watching the local developers come in with projects compared to the national companies, a lot of times the breaks go to the ones whom have a more efficient operation.

    • Rob

      ¿Que? The state has given tons of breaks to the corporate owners of sports teams and to the leagues. And as Mike Worcester noted, the state has given major tax breaks to Northwest and other corporations.

      • Jay T. Berken

        I’m not totally happy with the State of Minnesota (e.g. JOBZ program by Pawlenty), but I did read an opinion in the Tribune a number of months ago arguing that the State of Minnesota should be throwing more money like Iowa and Wisconsin at the Apple and Foxconns of the world to locate in their state. I do not want that kind of pandering to companies.

  • Mike Worcester

    //Or what? It’ll move to Minneapolis and rename itself Northwest Airlines?
    And here I was hoping for a return to Northwest Orient. 🙂

    For those who were around in Minnesota in 1991, there was a long and ugly fight over whether or not the state should offer a bailout to Northwest. We need to keep them viable and here, said the proponents. No, the state should not be in the business of subsidizing large corporations, said the opponents. In the end, the state said yes, and NA later reneged on some of its promises.
    http://www.aviationpros.com/news/10400288/duluth-angry-as-nwa-walks-away-from-46m-maintenance-base

    At the same time, the loan was eventually repaid.
    http://minnesota.cbslocal.com/2011/10/25/delta-repays-old-nwa-state-loan/

    And yes, Delta is not going to leave Atlanta just because some random elected official opens their trap. Unless they too get bought out by a bigger fish. (Imagine the scrum if someone like Turkish Airlines or Emirates Airlines moves to purchase Delta?)

    • Don’t forget the Chisholm reservation center and the promise of an Airbus repair center on the Iron Range.

  • Jay T. Berken

    Hey Bob, when is a MPR member (sustaining one at that) going to get discounts for delta flights…10% discount at Gandhi Mahal is lovely, but it’s not Delta…;)

    • Barton

      wait!!! There is a discount at Gandhi Mahal???? I have got to start paying attention (I see some chana saag in my very near future).

    • Brian Simon

      Wait, there are discounts at gandhi mahal?!?

  • All this really reveals is that the Georgia GOP gets more money from the NRA then they do from Delta. Pony up Delta. You need a little more quid to get this quo.

  • MNIce

    I don’t see how this situation “underscores the fallacy of corporate giveaways.” A fallacy is an error in logic. What is the error in logic here? We can debate whether the premises are true, and we can certainly debate the wisdom, but the logic itself is sound:

    1. Corporations are sensitive to tax rates
    2. Corporations are desirable in the state because they provide jobs for its citizens and pay some taxes.
    3. It is better to collect some taxes than to insist on higher rates and collect no taxes.
    Therefore, lowering taxes for a prospective corporate resident is profitable for the state treasury and for the state as a whole.

    The conclusion follows from the premises as it should, although it is weaker than it could be. The stronger, and I think wiser, conclusion is “Therefore, lowering taxes for all corporations is profitable for the state treasury and for the state as a whole.”

    There is another aspect of the first premise that needs to be examined. Corporations are not only sensitive to corporate tax rates, but to the tax rates on their employees. It is more difficult to attract and retain high quality workers when the workers see that they have a higher net income in a state with lower wages and lower taxes. (That’s why my sister turned down an offer to practice medicine at Mayo Clinic Rochester in favor of a position in South Dakota with a lower salary and no state income tax.) That was also very likely a factor in Delta’s decision to leave Minnesota.

    Minnesota should reduce its income taxes for both corporations and workers. It’s ridiculous to be collecting income taxes from poverty-level workers at rates higher than the maximum rates in other states. Minnesota tax rates are consistently among the worst five in the nation. This discourages investment in what is otherwise one of the best states in the nation. Lowering tax rates will make the state more attractive to employers, which in turn will increase demand for workers and generate wage increases. A reasonable tax and regulatory environment makes special tax breaks completely unnecessary. Higher employment rates and wages also reduce the need for welfare support, so we can reduce state spending for these programs without hurting anybody. “The best welfare program is a good job.” That piece of wisdom remains true.

    • Delta didn’t leave Minnesota.

      • Frank

        They didn’t leave anything there, but the gates either.

    • king harvest

      If what you propose were true, why are there more large corporations in Minnesota than Georgia? Why does high tax Minnesota have a lower unemployment rate?

  • Frank

    I’m sitting in ORD right now, waiting for my connecting American flight. I’m a Delta Gold member, but they say that don’t want my business, and I’m a believer a business should not be forced to provide service to folks they don’t want to.

    It’s an inconvenience, giving up the perks of status, but I expect to gain most of it back with American this year. It’s a win win.

    Also, I’m glad Georgia isn’t going through with the tax break for Delta. Not as punishment for foolishly inserting politics into their business, but because they shouldn’t have gotten one in the first place…well, unless they rename it “the People’s Airline”, cause then it would be OK.

    • // but they say that don’t want my business, and I’m a believer a business should not be forced to provide service to folks they don’t want to.

      They never said any such thing. They just don’t think you should get a discount that the person next to you isn’t getting and by having everyone pay the same fare, they can thus remain neutral is what is obviously an ideological debate. Will that upset the NRA members? Yeah, probably. Delta has probably calculated that the drop will be insubstantial and perhaps made up by people who do not share your view.

      Most of the complaienrs will fly Delta as soon as they’re faced with making a connection with an alternative. Remember the NWA pilot strike? Everyone said , ‘I’m never flying that airline again.”

      They did. And they will again.

      People talk a great game. This is the outrage du jour. It’ll blow over and you’ll fly them again. People aways do.

      Also, Delta is going to end up getting that tax break so your protest will make you feel good and accomplish nothing; seems to me you recently had an opinion on that scenario.

      • Frank

        They have said they do not want to be associated with the NRA. As a 20 year, dues paying member, I am the NRA.

        But you’re right.

        If I’m forced to fly Delta to make an appointment, I will, because it’s my deal not my employers.

        But I’ve been very successful at sticking with Delta for the past 10 years; never falling below Silver level. I’m guessing I’ll be able to replicate it with American.

        I’m also under no delusion that my business will be missed; it’s a matter of principal for me. So in that, my protest is completely successful.

        I’ve never participated in any kind of boycott before, but this issue is a line in the sand for me. I think it is for many millions of people, too.

        • KTN

          However dubious tax incentives like the one primarily favoring Delta are, the bill has already passed the House in a larger tax bill, so the blustering and blathering of the Lieutenant Gov is meaningless. There is nothing he, or any other single Republican can do, execpt bloviate and huff and puff.
          Good for you however, for your first boycott – it’s soooo exciting isn’t it.
          For me the line in the sand is the 20 little children blown apart by an AR, and then the 17 teens killed by the same last week, but each to his own.

          • Frank

            Yeah, I hear Cecile Richards has drawn the same line. Bless you both for your virtue.

          • KTN

            Thanks, but this isn’t virtue, just a basic humanity.

            I wanted to boycott Delta last year too, after they pulled financial support for a production of Julius Cesar, where the title character bore a striking resemblance to the two-bit ignorant racist some call president, but now, in the end, it seems no boycott was necessary.

          • Frank

            Well, I’m happy that the end of that two bit, ignorant racist’s tenure brought you closure. A lot of people felt the same.