MA, RI subsidize millionaires, cut the arts

The state of Massachusetts has been slashing funding for the arts – and much else – so why is it handing out subsidies to the financial industry? And as Rhode Island plans arts cuts, why are its politicians offering subsidies to a millionaire businessman?

Masschusetts Governor Deval Patrick is proposing to cut the Massachusetts Cultural Council’s budget by 3 percent to $9.4 million for the fiscal year beginning July 1. That’s on top of major cuts last year, which together would add up to a 26 percent cut for the state art agency over the two years.

Certainly times are tough, so the arts have to make sacrifices like everyone else. Except apparently the financial industry.

Wednesday, the Massachusetts Economic Assistance Coordinating Council approved a multi-year $22.5 million tax break for insurance giant Liberty Mutual to help it build a $300 million office tower at the corner of Berkeley Street and Columbus Avenue in Boston. That’s on top of a $16 million tax break from the city of Boston over the next 20 years. So $38.5 million in city and state tax breaks spread over two decades, or corporate welfare of $1.925 million a year. Just eliminating this one special corporate handout would pay for at least 65 percent of the $2.95 million that would be cut from the Massachusetts Cultural Council.

As Blue Mass Group notes, Liberty Mutual told the Boston City Council on March 12 that it had no intention of leaving Boston whether it got the government subsidy or not. As for the 600 new jobs the company pledges to create here, Blue Mass’s Shirley Kessel writes:

“Liberty is promising to create, at its 2500-employee Boston headquarters campus, an average of 30 jobs annually for the 20-year term of the tax break – barely 1% hiring growth that will be invisible in a company this size, and indeed, under one-fourth the number of jobs Liberty has created annually (125) since 2004 WITHOUT any tax break.”

That’s some creative economy.

Meanwhile, Rhode Island Governor Donald Carcieri is proposing cutting all the state’s arts grants, while he and other Rhode Island politicians are courting millionaire former-Red Sox pitcher Curt Schilling about moving his video game company 38 Studios, now headquartered in Maynard, Massachusetts, to Rhode Island in exchange for tax breaks.

The Providence Journal reported on March 24:

The Rhode Island connection grew out of a chance meeting between Schilling and Governor Carcieri at a March fundraiser at the pitcher’s Medfield, Mass., home. The two fell into conversation about 38 Studios.

“My sense was that he wasn’t particularly thrilled with the reception he was getting in Massachusetts, so I said: ‘Come on down, we’d be happy to talk to you,’” Carcieri recalled.

Schilling took him up on the offer and came to Rhode Island several times in the past few days, meeting with House Speaker Gordon D. Fox, Economic Development Corporation Director Keith Stokes and several other state officials.

And you thought Rhode Island was broke.

Denise Kaigler, chief marketing officer for 38 Studios, tells The New England Journal of Aesthetic Research:

• 38 Studios has been contacted by several states and as part of normal due diligence, we have participated in several discussions. Yes, Rhode Island is one of the states with which we have been in contact. We have not disclosed the names of the other states.
• The various states are initiating the contact.
• Details of the discussions are confidential.

When we try to figure out priorities for our government spending, a problem is that we never really debate our government budgets as a whole, including all areas of spending and tax cuts. We think arts spending is being cut to fund police or firefighters or teachers or care for the elderly and poor. When really what's happening now is that everything is being cut, except for special backroom socialist subsidies for millionaire capitalists that don't pop out as line items on government budgets.

Those government gifts to millionaires have to come from somewhere. Special tax deals for individual businesses hurt the rest of us because government then has to make up for this loss in income by increasing taxes elsewhere (meaning you and me) or cutting police or firefighters or teachers or care for the elderly and poor. Or the arts.

One rough rule of thumb for lawmakers and capitalists: If a business advertises regularly on network television, it probably doesn't need government handouts.

Of course, this problem is not new. A decade and a half ago, Massachusetts changed the way its mutual-fund industry is taxed so that last I looked it was saving the industry more than $100 million in taxes annually. The Boston Globe recently reported on a Massachusetts program that gives businesses tax cuts in exchange for creating jobs. Except that the Globe report suggests that there's little oversight – so that, for example, Nortel Networks, which pledged to add 800 jobs, actually cut 2,055 jobs. And yet it continues to get the tax break.

This is "business" as usual, locally and across the country.

Update:
Also, AT&T, 3M, Deere & Co, Caterpillar and other major companies are projecting that the recently passed federal health care program will cut into their profits. In particular because the law eliminates a subsidy to businesses that was part of the Medicare prescription drug program passed in 2003. How did it work? To encourage businesses to continue covering retirees, the government picked up 28 percent of companies' costs – then it allowed companies to not pay taxes on the entire cost of their drug plan spending, plus the part the government paid for.

The old plan was a bit like your boss taking you out to lunch. She pays. You take the receipt, return to work, and submit your meal for reimbursement.

Previously:
Nov. 2, 2009: Fine arts not in Patrick’s Creative Economy?
June 29, 2009: 23 percent cut for MA cultural council.
June 14, 2006: Your tax dollars at work: “A decade ago, the state changed the way Massachusetts’s mutual-fund industry is taxed in a way that, according to our Department of Revenue, will save the industry roughly $132.4 million this fiscal year and some $141 million the next.”