Posts in tax incentives
Why is state of Texas helping bribers, polluters and pill-pushers?

Most businesses in Texas play by the rules, generate local jobs and are upstanding members of their communities. Unfortunately, our economic development policies are as likely to reward the bad guys as the good guys.

Texas offers some of the most generous economic development incentives in the nation. The Texas Enterprise Fund, the biggest “deal closer” for our state, provides cash grants to entice companies to come here. Even more generous is the Texas Chapter 313 incentive, a program mostly for energy companies that provides tax limitations worth tens of millions of dollars. Add to this local and county incentives, and Texas is notorious for picking a small set of companies for preferential tax treatment of cash payments — even bribers, polluters and pill-pushers.

Bribing government officials in the United States or abroad is illegal under the U.S. Foreign Corrupt Practices Act. Though rare, when companies are caught, it’s major news. Companies pay millions in fines and executives may even face jail time. In Texas and many other states, the few companies settling bribery claims are also companies that receive millions in taxpayer-funded subsidies.

Did state officials know that they were subsidizing bribers?

Read the rest at the Waco Tribune-Herald.

Five economic development takeaways from the Amazon HQ2 bids

Amazon’s decision to cancel its New York headquarters investment has led to intense debate among academics, politicians, and civil society. The split culminated Amazon’s very public search process in which 238 U.S. cities submitted detailed bids to the company to host its “second headquarters,” or HQ2. Many of these bids remain secret, shielded from public records laws due to exceptions to public disclosure of economic development projects, or the use of non-public entities, such as Chambers of Commerce, to submit the bid. But for 26 publicly-released bids, we have a rare opportunity to peek under the hood of U.S. regional economic development. Here are five main takeaways from a review of these bids.

1. WE KNOW MORE ABOUT HQ2 THAN MOST ECONOMIC DEVELOPMENT DEALS.

Many journalists and civic leaders expressed frustration over the lack of transparency in the HQ2 process. Few cities provided the full details of their offers during the process, and cities such as Austin, Denver, Indianapolis, Houston, Los Angeles, and Miami have still not made their proposals public.

Yet the reality is that most corporate site selection processes remain outside the public eye. The fact that Amazon made this a public competition led to additional scrutiny of the site selection process. Numerous local journalists, such as those in the Dallas and Denver areas, were able to explore local proposals and reveal more about this process than most other economic development deals. …

Read the rest at Brookings.edu

Podcast: Why Governments Give Away Economic Incentives That Increase Inequality

Amazon’s headquarters decisions are drawing attention to economic development incentive programs designed to bring businesses and jobs to states and localities, while local opposition in New York drew attention to their role in inequality. Why do states and localities continue to offer them, despite academic research showing they are ineffective? Nathan Jensen finds that voters reward politicians who offer (even unnecessary) incentives, meaning they keep on offering bigger checks. Cynthia Rogers finds that state incentives increase the gaps between the rich and the poor, but they remain an ever-popular tool.

Interviews: Nathan Jensen, University of Texas and Niskanen Center; Cynthia Rogers, University of Oklahoma

The Amazon HQ2 Fiasco Was No Outlier

In September 2017 Amazon issued an open invitation for North American cities to put in bids for hosting the company’s $5-billion “HQ2” (that is, second headquarters) and the 50,000 jobs it’s expected to bring. Well over 200 locations applied. Their submissions included a range of gimmicks, from an offer to create a separate city called Amazon to free sandwiches for company employees—but also, crucially, billions of dollars in economic development incentives.

When Amazon announced last month that it would split HQ2 between New York City and Arlington, Va., losing applicants cried foul: They accused Amazon of an extraordinary bait-and-switch, enticing dozens of bidders to increase the competition and the incentive offers, only to end up with two of the most obvious candidates all along.

The reality is that this sort of competition for big projects, while unusually large in the Amazon case, is the rule not the exception in economic development and has been for a long time. It has been happening in the U.S. since Alexander Hamilton received local tax exemptions in 1791 to build up the city of Paterson, N.J. as an industrial center. What’s different in our own era is that most companies aren’t actually changing their decisions based on incentives but are pocketing substantial benefits anyway.

Studies show that the cost and frequency of incentive packages—which cities and states typically offer companies to either relocate or stay put—have been rising. Secrecy surrounding many of the deals makes a full accounting difficult, but a new database assembled last year by the Upjohn Institute for Employment Research covers programs for 47 cities in 33 states. It found that the cost of such incentives more than tripled from 1990 to 2015, to $45 billion. …

Read the rest at the Wall Street Journal.