Bloomberg News

Gunmaker Tax Breaks to Lure Jobs Face Renewed Scrutiny

January 09, 2013

Gunmaker Tax Breaks for Jobs Scrutinized After School Shooting

A man holds a semi-automatic assault rifle made by Bushmaster Firearms International LLC at the Rocky Mountain Gun Show in Sandy, Utah. Photographer: George Frey/Bloomberg

Governments in nine states have awarded at least $49 million in subsidies in the past five years to gun and ammunition makers whose products are under scrutiny after last month’s school shooting in Connecticut.

Almost 85 percent of those tax breaks or grants have gone to two companies: Olin Corp. (OLN:US), the Clayton, Missouri-based maker of Winchester-brand bullets and shotgun shells, and a unit of Freedom Group Inc., the Madison, North Carolina-based company that produces the rifle used in the Dec. 14 killing of 20 children and six adults at Sandy Hook Elementary School in Newtown.

The subsidies from state and local governments are attracting attention after high-profile mass murders last year, which also included a July shooting at a suburban Denver movie theater that killed 12. Lawmakers and gun-control advocates are pressing to stop aid for weapons manufacturing, saying it does little to create new jobs and isn’t worth the social costs.

“Sometimes our moral compass gets spinning and we don’t care who we give incentives to or what the unintended consequences are,” said Kentucky Representative Jim Wayne, 64, a Democrat whose state approved $4.8 million in tax breaks in the past five years for closely held Freedom Group’s Remington Arms Co. unit. “We have to be very serious about whether we want to attract these kinds of jobs into our state that actually further a culture of violence.”

Luring Jobs

Governments in Arkansas, Arizona, Florida, Kentucky, Maine, Massachusetts, Mississippi, New Hampshire and New York approved the subsidies to lure jobs from other states or to keep companies from moving, according to public records. The incentives were aimed at protecting or attracting more than 2,800 jobs, and for companies to train 500 workers. Lawmakers said they hoped more jobs would follow.

The subsidies aren’t unique to the weapons industry, as governments around the country routinely offer aid for jobs.

“Incentives help businesses expand and grow and stay healthy,” said Joe Holmes, director of marketing for the Arkansas Economic Development Commission, which has approved tax credits for Remington’s ammunition plant near Little Rock.

Lawmakers are taking another look at the subsidies as gunmakers and their advocates, including the National Rifle Association, prepare to battle state and federal proposals to restrict sales of some products.

Gun Violence

President Barack Obama, a Democrat, has promised to push efforts to control gun violence early in his second term and asked Vice President Joe Biden to develop proposals. U.S. Senator Richard Blumenthal, a Democrat from Connecticut, said yesterday he would introduce legislation to require background checks for anyone buying large quantities of ammunition.

Wayne LaPierre, chief executive officer for the NRA, a Fairfax, Virginia, membership organization that calls itself the foremost defender of the Constitution’s Second Amendment, has said Congress should respond to the shootings by paying for armed guards in public schools.

Advocacy groups, including the Bellevue, Washington-based Second Amendment Foundation, plan a “Gun Appreciation Day” on Jan. 19 to protest calls for new restrictions. The organizations are asking Americans to line up “around the block” at gun shows, stores and firing ranges.

In New York, where Democratic Governor Andrew Cuomo wants to broaden the state’s ban on certain rifles and become the first state to respond to the Newtown shootings, Remington has been awarded $6.6 million in incentives since 1999, according to New Yorkers Against Gun Violence, which obtained the information from the state through open records requests.

Upgrading Plants

That includes $2.4 million in 2010 for plant upgrades and equipment to shift production away from Connecticut and bring 78 jobs to the state, according to the Empire State Development Corp.

Remington helped defeat legislation in the state that would have required manufacturers of semiautomatic weapons to include “microstamping” technology in firearms, said New York Assemblywoman Michelle Schimel, a Democrat from Nassau County. The technology, which gunmakers oppose as too costly, stamps a code on shell casings to help law enforcement identify weapons used in crimes.

Subsidies for gunmakers should be reconsidered if the industry continues to fight measures sought by law enforcement, Schimel said.

Ammunition Plant

“As long as they say no to any sensible gun regulation, I’d say no” to subsidies, Schimel said.

Ted Novin, director of public affairs for Freedom Group, didn’t respond to telephone messages seeking comment about lawmakers opposing subsidies for the company.

In Mississippi, Olin received $31 million in subsidies from state and local governments in 2011 after agreeing to relocate jobs from Illinois. Olin built a Winchester ammunition plant in Oxford that the company said would employ about 1,000 people, according to Securities and Exchange Commission filings. The aid came after Illinois offered incentives to keep the manufacturing jobs.

“This has been a great thing for the city of Oxford,” Mayor George Patterson said. “We’re proud of our association with Winchester and it’s provided some great jobs. Winchester was -- and continues to be -- welcome in our community.”

Larry Kromidas, a spokesman for Olin, didn’t respond to a message left with his office or an e-mail seeking comment on the subsidies.

State tax incentives generally don’t add jobs to the U.S. economy, said Joseph Henchman, who follows state policy for the Tax Foundation, a nonpartisan tax research group based in Washington.

‘Moving Jobs’

“For the most part, these are understood as moving jobs around the country instead of creating jobs -- and they may not even be doing that,” Henchman said. “It’s rare that businesses look only at the incentives when deciding where to locate.”

In addition to subsidies, Idaho and Montana have created economic development programs that advertise pro-gun laws. The Montana program has helped three gun companies open, said Republican state Senator Ryan Zinke, a director of the Montana Firearms Association, which markets the state’s strong gun culture and non-union labor force.

“We may not be taking companies away from the East,” Zinke said. “We have managed to take away market share.”

New Restrictions

Pro-gun activists have told state lawmakers that companies might relocate jobs if new firearms restrictions are approved. In Connecticut, lawmakers didn’t vote on a proposal two years ago that would have banned the 30-round ammunition magazine used in the school shooting after Jake McGuigan, government-relations director for the Newtown-based National Shooting Sports Foundation, lobbied against the bill by referring to recruiting efforts from Idaho, Virginia and North Carolina.

One of the companies that fought that ban was Smith & Wesson Holding Corp. (SWHC:US), a Springfield, Massachusetts-based gun manufacturer that, in the year ending April, 2011, was awarded at least $6.5 million in tax incentives from Massachusetts and Springfield, its home for more than 100 years.

Smith & Wesson, whose weapons armed Clint Eastwood’s character in the “Dirty Harry” movies released in the 1970s and 1980s, used the money to shift a production line from New Hampshire, according to documents filed with the Securities and Exchange Commission.

Elizabeth Sharp, vice president of investor relations at Smith & Wesson, didn’t respond to telephone messages or e-mail seeking comment about incentives.

‘Sweetheart Deal’

In Florida, Republican Governor Rick Scott hailed an incentive for the West Hartford, Connecticut-based Colt Manufacturing Co. in 2011 saying it showed the state was “a defender of our right to bear arms.” The deal, for 63 jobs, was worth about $1.66 million in state and local incentives, according to Enterprise Florida, the state’s economic development arm. The agreement penalizes the company $50,000 if it doesn’t produce all the jobs.

Frank Attkisson, a commissioner in Osceola County, which provided incentives, said it was a “sweetheart deal” for Colt and that the county would put tougher controls on future subsidies.

Florida state Senator Nancy Detert, the Republican chairwoman of the Commerce Committee, said she’s crafting legislation to make it more difficult to provide incentives for companies that don’t specialize in science and technology. She said she doesn’t want Florida to be known for gun manufacturing.

“We need to be a lot more careful and decide what kind of state we envision,” Detert said.

To contact the reporters on this story: Michael C. Bender in Tallahassee at mbender10@bloomberg.net; William Selway in Washington at wselway@bloomberg.net

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net


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Companies Mentioned

  • OLN
    (Olin Corp)
    • $25.89 USD
    • -0.87
    • -3.36%
  • SWHC
    (Smith & Wesson Holding Corp)
    • $13.63 USD
    • -0.17
    • -1.25%
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