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The South is more likely to hand out corporate subsidies

Justin Upton #8 of the Atlanta Braves knocks in two runs with a 3rd inning double against the Boston Red Sox at Turner Field on May 26, 2014 in Atlanta, Georgia. 

The ink is drying on contracts that will commit upwards of $400 million taxpayer dollars to a new stadium for the Atlanta Braves. The baseball team is supposed to pay some of that back in rent, but last week’s deal looks to many critics like an enormous public subsidy for a profitable business.

If you feel like this kind of thing happens more often in the American South, you might be right.

Take this year’s race for governor in Georgia, for example, where the Republican incumbent’s first TV ad is running.

“Governor Nathan Deal lowered taxes on job creators,” the hushed narrator intones. “Now, for the first time in history, Georgia is the number one place to do business.”

Number one according to whom? Site Selection magazine, a publication dedicated to "corporate real estate strategy and area economic development." 

Just in case they don’t have that one in your dentist’s waiting room, the magazine praises Georgia for its generous incentives – like a 30 percent state tax credit for filmmakers. Local governments also spend millions on infrastructure to lure factories and the like.

Funneling taxes to private enterprise is an old habit in the South, says James Cobb, a historian at the University of Georgia.

“After the agricultural economy was pretty much rend asunder by the Civil War, the southern states began to provide incentives and sweeten the deals to attract outside capital that was supposedly going to bring the South back to prosperity by urbanization and industrialization,” Cobb says.

The freebies were meant as a temporary kickstart, he says. But by the 1950s, northern governments started using the same tricks.

“And then, in the last generation, the global labor market has become so competitive that it’s been very hard to sort of ditch the subsidy approach,” Cobb says.

That’s despite the fact that handouts to business are incredibly unpopular with southern voters. That includes Cobb County, the Atlanta suburb that’s trying to lure the Braves. Last week, opponents had to be dragged out of a public hearing on the stadium deal.

Local politicians say any other community would bend over backwards to land such a big catch.

But, Cobb says, there comes a point where you become so business-friendly, there are no goodies left for everybody else: "You throw over so much in public expenditures in various things, including education, to keep taxes down, that you reach a point of it being self-defeating.”


*CORRECTION: An earlier version of this story incorrectly stated Site Selection magazine's ranking of Mississippi's business climate in the 1990s. Mississippi never received the No. 1 ranking from Site Selection. The text has been corrected.

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