Costco buys its corporate welfare by the gross 

Costco, the big-box members-only discount store, has plenty of good ways to profit in a very competitive industry: offering limited varieties, but almost always getting good quality; skimping on customer service and shopping bags; not taking credit cards; and stealing from taxpayers and landowners.

The new Costco in Wheaton, Md., will get plenty of aid from the taxpayers of Montgomery County. Examiner alumnus Michael Neibauer has the story at the Washington Business Journal:

County Executive Ike Leggett has agreed to contribute $4 million from the Economic Development Fund, over two years, to aid in the construction of the mall's 232,000-square-foot addition, which will include 148,000 square feet for Costco on the second level and 80,000 square feet of retail space on the first level. The former Hecht's Department Store space will be demolished.

The county council is expected to approve the funding as part of the fiscal 2012 budget, despite opposition from those who say the money could be better spent protecting county employees from furloughs, or preserving critical county services.

County officials say that the county will recover this $4 billion handout in 10 years, but I'm not sure about the math. For one thing, it looks like the County is just looking at tax revenue Costco will bring (after their special tax breaks). That ignores the fact that (a) maybe Costco would have come, even without the bribes, (b) certainly some other business could have come without being bribed to come.

Also, as my colleague Hayley Peterson wrote a year ago, Costco's entry will kill other businesses.

Maybe in the long run, Costco will cause more revenue for County coffers, but that's not so uplifting either. First, because of the way government works, the transfer will eventually work this way:

Taxpayers --> County Gov't --> Costco --> County Gov't --> Some other project

If this "investment" pays off for the county, the taxpayers don't get the money back. It's just money laundering.

Second, think about the calculation at work here: whoever generates most profit per square foot gets preference from government. We certainly see this at work in eminent domain, where the Supreme Court has basically said local politicians have the right to take from one owner and give to another if the politicians think this will benefit the community -- which often means generate more tax revenue.

Turns out the criticism of capitalism -- that the big steamroll the small -- is far more true of Center-Left managed economies like Montgomery County, Maryland.

Again, this reliance on government is typical for Costco, including eminent domain takings. I don't mean to single out Costco -- Home Depot relies on eminent domain, and Wal-Mart swims in corporate welfare.

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Timothy P. Carney

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