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Are The Millions We Give Away In Subsidies Worth It?

by: mooncat

Thu Dec 06, 2012 at 12:00:00 PM CST

Corporate welfareAre public subsidies to corporations a smart way to encourage development (and jobs) or just taxpayer-funded corporate welfare?  Louise Story has addressed this question in an excellent three part series for the New York Times, "The United States of Subsidies."

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.

So much for accountability.  States (including Alabama) don't have information on how many jobs these subsidies bring in and how much new tax revenue they generate.  And of course, the corporations aren't about to answer the basic question of would you have created these jobs here even without the subsidies?

The NYT has created a searchable database of all the subsidies they were able to identify.  For Alabama, that amounts to at least $277 million -- $58 per Alabamian or 4% of the state budget.  The biggest recipient of our largesse is Airbus (EADS) at $158 million.  The company is locating a new assembly plant in Mobile.  Would they have come to Alabama without the subsidy or with a lesser amount?

We'll never know, but we do know that EADS North America boasts of facilities in 10 other states.  Of those 10, only Kansas admits to providing a subsidy, in the amount of $23,200.  The SubsidyTracker database, from Good Jobs First, also finds no Airbus subsidies from states other than Alabama and Kansas.

Did Alabama overpay for the Airbus jobs -- or the Toyota jobs -- or the ThyssenKrupp jobs

[Recently] The Wall Street Journal reported that ThyssenKrupp, a German manufacturer, decided to sell the largest, and newest, steel plant in America. It cost $5 billion to build and has been open for less than two years. The state of Alabama gave the company $1 billion in subsidies — most of which is now gone for good. That’s a lot of money. That’s crazy money. Which raises the question: How much crazy will it take for this kind of silliness to stop? 

Concern over out of control subsidies is not a liberal or conservative, Democrat or Republican issue. For instance, the preceeding paragraph was penned by John E. Sununu, a former Republican Senator from New Hampshire.  This is a common sense, pragmatic, taxpayer issue, not a partisan one.

Are the jobs worth the cost to taxpayers?  We'll never know because Alabama has no evaluation program in place to show what we get in exchange for $277 million in corporate gifts.  A recent Pew Research Center report indicates that most states, like Alabama, don't properly evaluate the effectiveness of tax incentives and other "job creation" giveaways.  Our public officials are blindly throwing money at corporations and thankful to get any crumb of economic development in return ... plus a photo-op at the groundbreaking ceremony.

This is important.  Every dollar spent on tax incentives, infrastructure or other giveaways to attract business and jobs is a dollar local and state governments can't spend on education, health care, transportation for the rest of us and critical government services.  As the recent Medicaid funding crisis illustrated, Alabama doesn't have any dollars to spare.  Incentive programs ought to be monitored to make sure taxpayers are getting a good deal, not just giving free money to corporations.

Instituting a monitoring/evaluation system to track corporate giveaways would be a much better use of our Legislature's time in the next few months than another legislative session devoted to probing ladyparts and making life miserable for immigrants.


mooncat :: Are The Millions We Give Away In Subsidies Worth It?
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is that just the total for state funds? (4.00 / 3)

Or does it include local, like Huntsville paying millions to move Belk department store a few miles down the road? At any rate, just that much would have covered the Medicaid deficit for this year plus the extra money that would eventually be needed if we did the Expansion.

I never got much response to my post a few weeks ago proposing that we require any company that gets subsidy funds, state or local, to repay the amount needed to fund Medicaid for employee families, up to the maximum of the subsidy, including for all part-time or temp employees-- and only let them off the hook if they provide health insurance at least as good as Medicaid with no cost-sharing for folks who would otherwise qualify for Medicaid (none of these high deductible pseudoinsurances).  I'm not sure how to write a bill like that, but I would think someone on this page can do it and post for us to proof, then find a sponsor.

It's all that the NYT investigative reporter could get data on (4.00 / 2)

I heard her interviewed on NPR yesterday and she talked quite a bit about the process of trying to ferret out the amounts of these subsidies in various states.  It turns out there is no central database of government giveaways, but she said most officials were willing to provide the information they had as to amounts, and some were even proud of how much they were giving away.  However, she made no claim to have identified all the money and in some cases, the states/municipalities don't even know how much they're giving away.  She used the example of Conneticutt which exempts many financial institutions, including hedge funds, from state income tax.  Because these corporations never file a tax return, the state has no idea of their income or just how much income tax they are losing through that exemption.  I'd be shocked if there were not similar instances a lot closer to home.

Your Medicaid payback proposal is a good one.  It's a bit of corporate welfare that most people don't even realize is happening.

Work harder and work smarter!

[ Parent ]
It would seem to be just common sense (4.00 / 1)

to measure the success of programs and incentives that cost the treasury millions each year.  This went on well before the GOP got control and it's a bi-partisan problem.

This is something that all Alabama citizens should be able to agree on and demand action.  The current system with no accountability only benefits two parties:  the politicians who get to show up for the announcement photo op and the companies that pocket the extra profits.

"The modern conservative is engaged in one of man's oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness."  - John Kenneth Galbraith



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