Is Ikea coming to Tennessee a good thing?

9/21/2017

In a new documentary, a conservative Nashville think tank is criticizing a $9.5 million tax break granted local government officials in Memphis to the furniture store Ikea, saying the break is an example of corporate handouts that hurt small business.

“Rigged: The Injustice of Corporate Welfare” was screened Tuesday night at the University of Tennessee Knoxville, one stop in a statewide tour that also includes stops at Vanderbilt University and the University of Memphis.

“Ikea is a very troubling example of corporate handouts, where you have the government coming in and essentially trying to lure this specific business into an area to compete with others who don’t get the same handouts,” says Justin Owen, president and CEO of The Beacon Center of Tennessee in the 20minute film. “It’s a very crystal clear example of the government picking winners and losers.”

The film centers on a $9.5 million tax break that the Economic Development Growth Engine for Memphis and Shelby County, or EDGE, granted to the Swedish-based company in January 2015 prior to the company’s $64 million investment in its Memphis location.

It also criticizes the relationship between Volkswagen and the city of Chattanooga, where the film says government officials granted millions in corporate handouts after the company threatened to take expansion plans elsewhere.

Memphis official says Ikea has been ‘wonderful project’

Reid Dulberger, chief economic development officer for the city of Memphis and Shelby County, said in an interview Tuesday that the documentary is not accurate and that Ikea “has been a wonderful project for Memphis and Shelby County,” generating millions of dollars in tax revenue that the area otherwise would not see.

“If there was no abatement, that project wasn’t coming,” Dulberger said. “That property would just be a vacant piece of property next to the highway and we wouldn’t have received anything from it. Really that project has and will pay for itself.”

Opponents say aid to Ikea hurts small business

The documentary features interviews with two small business owners with furniture stores in Memphis. The store owners said they’re not opposed to Ikea coming to Memphis, but said local government was unfair in granting a tax break for the company.

They also said that high taxes, high real estate costs and difficulty working with local government were challenges in starting their businesses in Memphis.

“They should not be paid any of the citizen’s tax dollars,” said Louis Cadell, owner of King’s Furniture, speaking about Ikea. “That’s very unfair to the businesses that don’t get any tax breaks. I’d rather Memphis repair the streets, the potholes, infrastructure, things of that nature. I also create jobs, I have employees too.”

The film says that subsidies and tax credits are not generally available to businesses across the board and that companies don’t always follow through with the number of jobs or economic stimulus they promise.

It also calls for more transparency around corporate handouts, especially in the months and years after they’re awarded, to see if they’re actually benefiting taxpayers.

Glenn Reynolds, a professor of law at the University of Tennessee, is featured in the film as a critic of corporate incentives and was among those that spoke on a panel discussion before screening at UT.

“Usually the political class gets excited about a particular type of business and they target subsidies to reward those,” Reynolds says in the film. “It may just be a fad among the governing classes.”

State Rep. Martin Daniel, R-Knoxville, also weighed in during the discussion saying that in the case of Ikea, the abatement the company received was “clearly to the detriment of existing furniture competitors.”

“I think legislation is needed to prohibit that sort of funding,” Daniel said. “It’s not to the benefit of the state or competing small businesses. It takes away their business, our tax revenue, jobs. We need to take care of that.”

Ikea expected to generate $17.5 million for Memphis

Dulberger said Memphis has numerous programs, grants and other forms of assistance, including abatements that are available to small businesses.

He said Ikea so far has delivered on its promise to bring 175 good-paying jobs to the city and that the average salary is $41,000. The store, which opened in December, is expected to generate $17.5 million in new tax revenue for Memphis and Shelby County, according to EDGE.

The film comes as IKEA also recently announced plans to build in Nashville. A spokesman for the mayor’s office there said Tuesday that there are no incentives or tax breaks in the works. Nashville-area officials in May lauded Ikea’s arrival.

“We’ve been trying to get Ikea to come to this area for a number of years,” state Rep. Sherry Jones said at the time the company announced its plans to expand. “So we are really excited that it’s coming. We know that Ikeas bring other retail business that they help the areas they enter expand and property value goes up. So we are just more than thrilled to have them.”

Source: Knoxville News Sentinel, by RACHEL OHM

The East Tennessee Economic Development Agency markets and recruits business for the 15 counties in the greater Knoxville-Oak Ridge region of East Tennessee. Visit www.eteda.org

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