It wasn’t good news: yet another business closing. This time it was in Port Clinton, an area hit even harder than the rest of our struggling state.
Silgan Plastics announced earlier this month that it would be shuttering one of its two area facilities located within two hours of each other. Jobs lost: 150.
As Ohio continues to lag behind most other states, the question always arises upon hearing the news of layoffs — what to do?
A story in the Sandusky Register said the state Department of Development was sending a rapid response team, whatever that means. And the county commissioners and Rep. Marcy Kaptur were scrambling to try to save the jobs.
Perhaps the jobs can be saved but it’s very unlikely. Besides, the best time to do something is before these announcements are made. And, as effective as they can be, this case highlights the challenges and limitations of tax cuts as a way to attract/retain business.
Despite its record earnings in 2009, Silgan is a company of many parts. And its plastic containers portion, a part of which is the Ohio facility that is set to close, did not have a good year in ’09. For the year, sales were down $110 million to $541 million compared to a year earlier.
Now, the company’s tax rate did change in the fourth quarter y-o-y from 28 percent in 2008 to 35.6 in 2009. This was due to the company’s change from Last In, First Out accounting to First In, First Out for the plastic container business, as well as “certain state tax credits and the impact of the full year benefit from research and development credits approved in the fourth quarter of 2008,” according to a company press release.
However, how much the change in taxes was due to tax credits or switching to FIFO, which could lead to higher income and thus higher taxes, is unclear.
But 2008 also was a year of closings for Silgan. It closed a plant in Alabama, idling 35 employees; in Richmond, Virginia it closed a facility and 15 employees were laid off; a facility closure and other consolidations in Turkey led to 150 people losing their jobs, according to its 2008 annual report.
In the report, Silgan also noted that, in 2006, it closed three other facilities in Minnesota and California, with 260 employees let go.
There are at least a few ways to view these actions. Silgan could simply be responding to the economy. Maybe it struggles with planning and buys or starts businesses only to find it overestimated its needs, forcing it to reduce capacity. Silgan may also be looking to increase shareholder returns. Or it could be a combination of all of these factors, and others.
We should still strive to get tax policy right and, more often than not, that means lowering tax rates for individuals and companies.
However, we cannot assume, nor argue, that lowering tax rates will cure all ills. Voters will find this incomplete, just as they will reject the idea that taxes must always go up to make the world a better place.
