Archive for January, 2013

Who Doesn’t Pay

January 30, 2013

At Good Jobs First we tend to focus on the ways that corporations get special tax deals from state governments, so it is helpful to be reminded that wealthy individuals also pay far less than their fair share. A definitive statement of this whopaysfact has just been published by our friends at the Institute on Taxation & Economic Policy in the latest edition of their report Who Pays.

The injustice of state taxation is summed up in the main finding of the report: “virtually every state’s tax system is fundamentally unfair, taking a much greater share of middle- and low-income families than from wealthy families.”

At a time when a number of red states are talking about replacing their personal income tax (PIT) systems with higher sales taxes, ITEP points out that the over reliance on consumption taxes (along with the absence of a graduated PIT) is a big part of the regressivity problem in many states.

ITEP notes that five of most regressive states—Washington, Florida, South Dakota, Illinois and Texas—derive half to two thirds of their revenue from sales and excise taxes, compared to a national average of about one third. The least regressive systems, by the way, are those in Delaware, the District of Columbia, New York, Oregon and Vermont.

Although the report does not focus on the corporate portion of state income taxes, it points out: “More than ten states gave away big breaks to profitable corporations either through rate cuts, a change in the apportionment formula used to calculate the corporate income tax, expanded exclusions, or the reduction or elimination of personal property taxes. These states include Arizona, Alabama, Florida, Idaho, Louisiana, Michigan, Missouri, North Dakota, Pennsylvania, and Wisconsin.”

Billions Wasted on Interstate Job Piracy and Job Blackmail

January 24, 2013

image001State and local governments waste billions of dollars annually on economic development subsidies given to companies for moving existing jobs from one state to another—or on “job blackmail” paid to prevent possible relocations. That’s the main conclusion of The Job-Creation Shell Game, Good Jobs First’s new study released today.

What was long ago dubbed a Second War Between the States is, unfortunately, raging again in many parts of the country. The result is a vast waste of taxpayer funds, paying for the geographic reshuffling of existing jobs.

By pretending that existing jobs that are relocated are “new” (or perhaps technically “new to the state”)—and thereby qualifying them for eight- and nine-figure subsidy packages—public officials and the recipient companies engage in what the report calls “interstate job fraud.”

Interstate job piracy is wasteful and unfair. The costs are high and the benefits low, given that a tiny number of companies get huge subsidies for moving a small number of jobs.

The strategy is low impact: detailed studies consistently find that the net impact of interstate job relocations—plus or minus—is microscopic for a given state.

The study includes eight case studies on metropolitan areas such as Kansas City, Charlotte, New York and Memphis, where companies get subsidized to move short distances across state borders. It also profiles states such as Texas, Tennessee, Georgia, New Jersey and Rhode Island that are aggressive users of relocation subsidies as well as states such as Illinois and Ohio, which have given big retention or “job blackmail” packages.

The report recommends that states “de-monetize interstate job fraud” by no longer dishonestly calling existing jobs “new” just because they have been moved across a state line. It further reveals that states already know how to do this: four-fifths of the states already refuse to pay for intrastate job relocations.

The report also recommends that states end their business recruitment activities that are explicitly designed to pirate existing jobs from other states. It also suggests a modest role for the federal government: reserving a small portion of its economic development aid for those states that amend their incentive codes to make existing jobs ineligible for subsidies.

Good Jobs First, sponsor of this Clawback blog, is a non-profit, non-partisan research center based in Washington, DC that promotes corporate and government accountability in economic development and smart growth for working families.