Herald-Leader Editorial

Lockheed job cuts mean no tax breaks; New approach to economic incentives better

June 5, 2014 

When people lose jobs, as was announced Tuesday for 110 employees of Lockheed Martin at Bluegrass Station, the entire community suffers.

Families lose income they depend upon, reducing what they have to spend at local merchants, or pay in taxes.

State economic development authorities probably gave in to excessive optimism when, praising tax incentives for Lockheed Martin, they touted the defense contractor as a secure employer bringing good jobs (average pay $25.44 an hour, including benefits) to Central Kentucky.

In reality, Lexington and Kentucky probably had little defense against the vagaries of federal budgets and the politics of military spending that led to Tuesday's announcement. About 700 Lockheed employees have lost jobs in less than three years, leaving about 1,000 workers.

But, in a positive contrast to years past, Kentucky taxpayers didn't give up any money on the front end to lure jobs that either never appeared or are now evaporating.

A 2005 study by the Herald-Leader found that Kentucky had given away millions of dollars in incentives for companies that never created the jobs they promised, and the state often made little or no effort to recapture those precious tax dollars.

Thankfully, that's changed.

According to the deal struck with the Kentucky Economic Development Finance Authority, Lockheed Martin would benefit from reduced state corporate income taxes and wage assessments contingent upon creating and maintaining a certain number of jobs. No jobs, no tax cuts.

That said, there remain legitimate questions about whether many incentives truly do attract businesses to states or simply sweeten the pot for those who would come anyway to take advantage of some combination of costs, location, work force, quality of life or other measures considered when locating an operation.

Clearly, Lockheed Martin, which recorded a 23 percent profit gain last year, is cutting some very good deals.

But if there is blame to be parceled out in the whole field of tax incentives and breaks, it shouldn't be aimed at for-profit companies like Lockheed Martin working to maximize returns for their shareholders. That's their job.

Any blame should fall instead on government officials who choose to give up tax revenue without getting enough in return.

The word "taxes" is deeply unpopular these days, but it is those dollars that pay for the education, work-force training and infrastructure that attract and nurture good jobs.

It's the job of public officials to make sure those tax dollars — whether collected or given away as incentives — are being used as wisely as possible.

Lexington Herald-Leader is pleased to provide this opportunity to share information, experiences and observations about what's in the news. Some of the comments may be reprinted elsewhere in the site or in the newspaper. We encourage lively, open debate on the issues of the day, and ask that you refrain from profanity, hate speech, personal comments and remarks that are off point. Thank you for taking the time to offer your thoughts.

Commenting FAQs | Terms of Service