Five Ways That Corporate and Economic Development Subsidies Fuel Racial Inequality 

Corporate subsidies are unfair in lots of ways: They funnel public money to wealthy business owners at the expense of the general public; they create interstate “races to the bottom” where governors and legislators feel they can only lure business to their state by bribing them with tax breaks. But do they also fuel racial inequality?

That’s the conclusion of Good Jobs First director Greg LeRoy, who writes in Nonprofit Quarterly that he’s identified five different economic development practices that intentionally or unintentionally fuel racial inequality and the transfer of public funds from the have-nots to the haves:

1. In geographic redlining, states favor white suburban areas over urban neighborhoods that are majority people of color. A Good Jobs First study in 2007 found that though Chicago had 38 percent of its metro area’s population and 30 percent of its business establishments, the city was getting only 15 percent of the available subsidy dollars; in other cities, like Detroit, the Twin Cities, and Cleveland, the disparity was just as stark.
2. Property tax abatements are the biggest subsidy many companies receive — $1.8 billion a year in New York alone — and because property taxes largely pay for schools, handing out tax breaks disproportionately affects public education. The resulting budget shortfalls land more heavily on neighborhoods of color: Schools in central St. Louis, for example, where the student body is 88 percent BIPOC, lose $1,634 per student per year — 91 times the $18 per student per year lost in the region’s largest suburban district, which is majority white. When similar numbers were revealed in Kansas City, Kansas City Public Schools superintendent Mark Bedell called tax abatements “systemically racist.”
3. Enterprise zones and tax increment financing districts originally targeted poor and “blighted” neighborhoods, but eligibility rules were soon relaxed to where just about any development can qualify. In St. Louis, the East-West Gateway Council of Governments found that TIF funding had actually subsidized the creation of suburban sprawl at the expense of the central city and older suburbs.
4. Development subsidies are overwhelmingly targeted toward large corporations rather than small businesses, though the latter are increasingly more likely to be owned by people of color. 
5. Megadeals — subsidies worth more than $100 million in public money — “massively transfer wealth from taxpayers to shareholders.” And because shareholders are disproportionately white — mutual funds make up 35 percent of white wealth, vs. 8 percent of Black wealth and 14 percent of Latino wealth — this means megadeals massively transfer wealth from people of color to white Americans.

LeRoy’s proposed solutions include: limiting economic development subsidies to genuinely needy areas, giving precedence to developments with good public transit so everyone can access jobs, denying subsidies to the wealthiest companies, and shifting development spending to small business. Without reforms like these, public development dollars will continue to create and maintain racial disparities that harm hundreds of millions of Americans.

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