Archive for June, 2010

Naming Tax Credit Names

June 15, 2010

Corporate lobbyists have long blown a fog of fear, disinformation and confusion about public disclosure of corporate income tax credits.

It’s time to clear the air.

First, a definition: corporate income tax credits are dollar-for-dollar reductions in the amount of income tax a company pays to a state (or federal) government. A company can earn such credits by performing activities deemed to constitute economic development, such as making capital investments in new capacity, performing research and development, hiring new employees, and/or producing movies or commercials.

These credits are very costly; among economic development tax breaks, they are likely the fastest-growing revenue drain on state budgets over the past decade. For example, one state gives a credit of 5 percent per year for 20 years for new capital investment. That is, if a company has enough taxable income, over time, the state will pay the entire cost of a new facility in foregone corporate income taxes.

Corporate lobbyists would have us believe that letting taxpayers see which company is getting these credits, and the dollar value of the credits, would somehow violate confidentiality or poison the “business climate.”

Nothing could be further from the truth. (Of course, we also need disclosure of outcomes: were the jobs created? How well do they pay? Do they have health care?)

I offer two kinds of evidence: 1) almost every other costly economic development subsidy has been disclosed for decades; and 2) many states have been disclosing corporate income tax credits for years, and there is no evidence they suffered any “business climate” harm.

First, regarding other costly subsidies: If a company gets a property tax abatement or reduction, there’s a public record at the county tax assessor’s office. If a company gets an Industrial Revenue Bond, that’s an open record at the county development authority. If a company gets a training grant, that is visible at the Workforce Investment Board. If a company benefits from being in a Tax Increment Financing (TIF) district, copious records enter the public domain. If a company gets a discretionary or competitive grant, those files are usually very public.

So what’s the big deal about income tax credits? Remember: this is not about disclosing tax returns; this is about disclosing tax breaks.

Second, regarding states that have been disclosing corporate income tax credits (naming the company, specifying the dollar value of the credit), just take a look at this quick sampling our staff threw together in an afternoon:

Connecticut – see pages 406-407 re: urban/industrial and job creation tax credits

Florida – Qualified Target Industry Refund

Illinois – numerous tax credits and exemptions, including EDGE

Maryland – film, biotech, job creation, and research and development credits

Missouri – 20 different economic development programs, including film credits

Montana – Low Income Housing Tax Credit Program

New Jersey’s BRRAG Program

North Carolina – William S. Lee tax credits

Pennsylvania — more than 200 programs, including film and enterprise zone credits

Wisconsin — 107 programs, including film investment, film services, and dairy credits

Other states, such as Maine (since 1999) have been collecting and disclosing tax credit data, but they just haven’t put them online yet (the 21st century progresses slowly…)

The list will soon get longer. Subsidy disclosure bills are getting introduced more frequently in state legislatures, and they often call for making public the names of corporate tax-credit recipients. This year, Massachusetts enacted a law that will do so, and several other states took a step in this direction by mandating the publication of tax-expenditure budgets that show the total cost of tax credit programs.

Bottom line: the amount of company-specific tax credit data online is exploding. Anyone who claims it will violate confidentiality or hurt the business climate, well, that’s just so 20th century!

Heads up to state commerce secretaries: in the same way we have twice graded the states’ Recovery Act websites, we are coming back at you to rate how well you disclose on major subsidy programs, revisiting our State of State Disclosure report of 2007.

No calls, please; that’s all the hints you get.

Pa. Subsidies Getting Smarter (Growth-wise)

June 12, 2010

For the first time ever, someone has mapped the same job subsidies in the same state at two different points in time to ask: Is there a change? And is it pro-smart growth?

The answer for Pennsylvania is yes, thanks to this week’s new study from the Keystone Research Center, which revisits subsidies it first mapped in 2003.

Each study covers more than 1,100 deals worth more than $600 million – all over the state. It breaks them down geographically by “older Pennsylvania” (which means cities, boroughs, and first-class townships that were formed pre-early 20th century) and “outer Townships” (the less-dense, second-class townships that make up the rest of the state).

In 2003, Keystone Research found per capita rates were identical in old and new areas of the state. But for the period 2003-2008, older Pennsylvania received 25 percent more dollars per capita than outer townships.

This is not inner-city-versus-exurb, or urban-versus-rural, because “older Pennsylvania” includes all kinds of rural towns and small-city centers throughout the state. And the results are very uneven across different metro areas in the state. (Erie and Reading stand out positively.)

What happened in the interim? Why did the needle move? Why did some areas change more than others? Keystone mostly speculates, summarizing interviews with state and local officials. But Gov. Ed Rendell did form an economic development cabinet and that body did adopt the “Keystone Principles” in 2005, which includes elements like “redevelop first” for existing areas and “fix it first” for infrastructure efficiency.

Some interviewees make it clear they see the value of reinvesting in already-developed areas. Montgomery County, outside Philadelphia, has explicitly embraced a plan that targets economic development subsidies to older areas, especially two of its hardest-hit older towns.

This is a drum Good Jobs First has been banging since 2000, and we applaud Keystone Research Center’s terrific precedent.

Bass Pro Exposé: Reeling in Subsidies

June 9, 2010

The Public Accountability Initiative in Buffalo has just released an excellent national investigation of big-box retailer Bass Pro. It finds that the privately-held company has been given more than half a billion dollars in economic development subsidies, yet in many cases, the arrival of a Bass Pro store has not resulted in the revitalization, tax revenues or job creation that the company touts. For example:

 “A Mesa, AZ development anchored by a Bass Pro has been described as a ‘ghost town’ and ‘dead’ and spurred the state to pass a ban on retail subsidies.”

 “A taxpayer-subsidized Harrisburg, PA Bass Pro is struggling to attract tenants to the mall it anchors, leading to lawsuits, stalled renovations, and increasing stigma. Though the Bass Pro was expected to hire 300-400 employees according to initial projections, it had hired only 101 employees three years after opening.”

 “Bass Pro has gone on a building spree over the past ten years that significantly undermines its claims that each new store is a major tourist destination. Bass Pro sometimes builds stores in close proximity to each other, despite having promised to maintain a store’s attraction as a retail destination that will draw visitors from hundreds of miles away.”

The study, “Fishing for Taxpayer Cash,” figures into a hot debate in Buffalo, where Bass Pro has been offered $35 million, as part of a $154 million overall project package, to build a store. The Erie Canal Harbor Development Corporation hopes the Bass Pro shop will anchor a comeback of an area in the noisy shadow of elevated Interstate 190 close to the shore of Lake Erie.

The deal has been long-delayed and hotly contested, as a coalition of more than 40 community groups, the Canal Side Community Alliance, has come together to demand a Community Benefits Agreement, including living wages for permanent employees, green building standards, and space for local merchants. The City owns much of the land in the project footprint, and the Buffalo Common Council, in response to the Community Alliance, has passed a resolution essentially saying “no Community Benefits Agreement, no land transfer.”

Followers of Good Jobs know that we have long been critical of big-box subsidies like those to Wal-Mart and to mall giants like General Growth Properties, and we strongly recommend Stacy Mitchell’s seminal book Big-Box Swindle. And we have written articles in both progressive and conservative journals about the unusual subsidy dispute among top three outdoor sporting goods chains (Gander Mountain versus Bass Pro and Cabela’s).