Wednesday, December 5, 2012

NYT asks if incentives & tax breaks really pay off for states

The New York Times published a story Sunday on how states are giving major incentive packages and tax breaks to corporations in an effort to recruit industry but are often left holding the bag. The story included an interactive map allowing the reader to see a list of projects and incentives for each state.

The map states Mississippi spends approximately $416 million per year on incentive programs. Topping the list are several grants provided to the "energy" companies- companies touting experimental energy technology promoted by the Barbour administration.The newspaper examined such deals nationwide and reported:

"A Times investigation has examined and tallied thousands of local incentives granted nationwide and has found that states, counties and cities are giving up more than $80 billion each year to companies. The beneficiaries come from virtually every corner of the corporate world, encompassing oil and coal conglomerates, technology and entertainment companies, banks and big-box retail chains.

The cost of the awards is certainly far higher. A full accounting, The Times discovered, is not possible because the incentives are granted by thousands of government agencies and officials, and many do not know the value of all their awards. Nor do they know if the money was worth it because they rarely track how many jobs are created. Even where officials do track incentives, they acknowledge that it is impossible to know whether the jobs would have been created without the aid.....

The Times analyzed more than 150,000 awards and created a searchable database of incentive spending. The survey was supplemented by interviews with more than 100 officials in government and business organizations as well as corporate executives and consultants.

A portrait arises of mayors and governors who are desperate to create jobs, outmatched by multinational corporations and short on tools to fact-check what companies tell them. Many of the officials said they feared that companies would move jobs overseas if they did not get subsidies in the United States.

Over the years, corporations have increasingly exploited that fear, creating a high-stakes bazaar where they pit local officials against one another to get the most lucrative packages. States compete with other states, cities compete with surrounding suburbs, and even small towns have entered the race with the goal of defeating their neighbors
..." Article


KaptKangaroo said...

I saw Phil's comments yesterday about investment in technologies that are "risky". I seem to remember a time when he was promoting new business that converted pine trees to fuel. What ever happened to that? And how soon one forgets?!?

Anonymous said...

Everyone gets investment fever but you come down to earth soon as you have to govern and meet the lawmakers coming to town with their Christmas lists. The Hallmark Cards executive from Kansas City said it best...the industry incentives are taking away education budget money which is the better investment. In our state budget education is ranked second and third (IHL $2.4B). The Development Authority is roughly half a billion and seventh in rank.

Anonymous said...

I've never understood why this practice is considered compatible with capitalism.

Taxpayers invest in a corporation but don't get to share in profits. They only get to be responsible for debt.

Taxpayers don't have a favorable " contract" as there's no real negotiation. The corporation makes demands and paints rosy picture dependent on the best scenarios of success to entice.

The investors who do share in profits get to reduce their risk as traditional corporate start up expenses are now all but non-existent. Management gets paid whether the venture succeeds or fails.

It seems more like bribery than competition. And, corporate executives are beginning to be nearly indistinguishable from old time con artists.

Anonymous said...

December 5, 2012 9:16 AM has just described the King Edward/Standard Life project.

bill said...

There are different kinds of corporate welfare. Giving taxpayer money in the form of grants or loans is a net loss of revenue that might have been spent on something else. That practice often doesn't work out, as was shown with the beef plant and the recent Twin Creeks failure. Offering tax incentives for a business to locate in Mississippi is different because we're offering savings from future taxes that presumably we would otherwise not collect because without the incentives the business wouldn't locate in Mississippi. The additional jobs the business brings create a gain in tax revenue from the employees of the new business, and if there are enough of them they actually spur further job creation. The competition for new business is intense, and we can compete much more effectively with MDA, public officials and private citizens out there hustling for our state. Bill Billingsley

Anonymous said...

Wonder if the NYT included all of the failed/bankrupt companies that Obama bankrolled with our money.

Anonymous said...

8:01, I was always under the belief that K-12 was 1st and Community Colleges & IHL was 3rd (Medicaid being 2nd). Is that not correct?

Anonymous said...

Medicaid $5.4B
Ed Dept $3.1B
IHL $2.4B
Human Services $1.3B
Transportation $1.1B
Mental Health $600M
Dev. Authority $506M
Emergency Management $492M
Treasury $488M
Health $440M
Corrections $340M
Jr. Colleges $312M

Kingfish said...

Depends on the incentives. I don't mind giving them in Jackson. It costs more to tear down old buildings and build new ones in their place than it is to plow up some pasture and build. Not a level playing field so I don't mind using some TIF's to erase some of the advantage. Having written that, I think TIF's are abused and would like to see a central registry of TIF's with the annual sales tax collected so we can see how well the TIF is doing.

Anonymous said...

Kapt. Kangaroo,

Yes, Bryant supported all of these aid-to-startup projects when he was Lt. Gov. under Barbour. Including the trees-to-fuel project KiOR.

The company says it's producing fuel in Columbus, but we don't know how much.

The chance of KiOR fulfilling its 1,000 job promise for the $75 mil we gave 'em is slim.

Anonymous said...

All TIFs in Jackson are underwater except those to build Pinnacle.

Anonymous said...

Capitol Green you mean.

Anonymous said...

4:01...again an idiot posting as an expert. TIF was NOT used in the Pinnacle.

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