Paul L. Caron

Monday, December 3, 2012

NY Times: States and Cities Shovel $80 Billion/Year in Tax Incentives to Companies, With Little Proof of Their Effectiveness

New York Times:  As Companies Seek Tax Deals, Governments Pay High Price:

In the end, the money that towns across America gave General Motors did not matter.

When the automaker released a list of factories it was closing during bankruptcy three years ago, communities that had considered themselves G.M.’s business partners were among the targets.

For years, mayors and governors anxious about local jobs had agreed to G.M.’s demands for cash rewards, free buildings, worker training and lucrative tax breaks. As late as 2007, the company was telling local officials that these sorts of incentives would “further G.M.’s strong relationship” with them and be a “win/win situation,” according to town council notes from one Michigan community.

Yet at least 50 properties on the 2009 liquidation list were in towns and states that had awarded incentives, adding up to billions in taxpayer dollars, according to data compiled by The New York Times....

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.

(Hat Tip: Ann Murphy, Mike Talbert.)

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The NYT database on this has problems. The Louisiana summary lists $1.6 billion of incentives as ad valorem rebate on offshore vessels, but when I tried to search the database of 2000+ companies, only two were shown as having claimed it and no amounts were shown, so I reached the conclusion that their data is not "auditable."

Posted by: NOLA | Dec 4, 2012 4:05:44 PM

The NY Times is measuring effectiveness wrong. These incentives are VERY effective in getting campaign contributions for the incumbents. After all, holding on to power and raking in the associated graft is what it's all about.

Or is that only the case when Republicans are the ones collecting the contributions and graft?

Posted by: Darth Chocolate | Dec 3, 2012 3:50:24 AM