Tens of billions in 'corporate welfare' tax deals about to be exposed like never before

• Special deals given by states to companies, including Apple, Google, Facebook, Microsoft and Amazon, can cost as much as $2 million per job.
• One analysis of Mississippi's deal to land a Nissan auto plant found it four times more expensive as was known, and the costliest deal ever to bring in a foreign manufacturer.
• A new accounting rule, GASB 77, will reveal to taxpayers tens of billions of dollars in spending never before disclosed and should result in a new debate about "corporate welfare."

Source: Facebook

A rendering of the upcoming Facebook data center in Fort Worth, Texas.

Then-candidate Donald Trump made American jobs a hyper-politicized issue, and even though unemployment is low, it's still big news when Carrier lays off workers in Indiana or when Taiwanese electronics giant Foxconn eyes Midwestern states to possibly create thousands of new jobs.

States and localities spend aggressively to lure private investment: one academic study estimated $70 billion per year — and that was before the Great Recession prompted some governors and mayors to double down on tax-break offers.

About half the states have enacted special tax breaks for data centers, also known as "server farms," where the cloud of computing data resides. When we examined 11 incentive packages given to data centers for some of the nation's most prominent internet companies (Microsoft, Google, Apple, Facebook, Amazon Web Services), we found costs of almost $2 million per job.

Yet 10 states with special data center tax breaks still fail to disclose even the aggregate annual cost in lost revenue. A new government sunshine rule (see below) should change that for states like Alabama, Indiana, Iowa, Mississippi, Missouri, Nebraska, Oklahoma, South Carolina, Tennessee and Virginia.

Data center megadeals

State	Company	Year	Subsidy value ($)	Jobs promised	Cost per job ($)	Capital investment ($)
OR	Google	2006	360,000,000	175	2,057,143	700,000,000
NC	Apple	2009	321,000,000	50	6,420,000	1,000,000,000
NY	Yahoo	2009	258,000,000	125	2,064,000	300,000,000
NC	Google	2007	254,700,000	210	1,212,857	600,000,000
NV	Switch	2015	229,000,000	100	2,290,000	3,000,000,000
TX	Facebook	2015	146,700,000	100	1,467,000	1,000,000,000
IA	Microsoft	2014	107,300,000	84	1,277,381	1,400,000,000
OH	Amazon Web Services	2014	93,700,000	120	780,833	1,100,000,000
NV	Apple	2012	89,000,000	41	2,170,732	1,000,000,000
AL	Google	2015	81,000,000	100	810,000	600,000,000
IA	Microsoft	2010	65,317,242	69	946,627	1,000,000,000

Good Jobs First

In Mississippi we examined the total cost of Nissan's auto assembly plant in Canton. Taxpayers remembered a special state legislature vote for a $295 million package. But when we examined local property tax abatements and state payroll-tax diversions, we found the cost was more than four times higher: $1.3 billion, making it the costliest "transplant" deal in U.S. history.

We know that Shelby County in Tennessee (which includes Memphis) grants about one third of all the property-tax abatement deals in the entire state. But the state's disclosure system, while it names corporate recipients, fails to reveal dollar values.

Using the Shelby example, we can't say what share of the revenue loss is suffered by any city, county or school district. But a new accounting rule, GASB 77, will change that — and lost property taxes matter greatly in a state with no personal income tax.

Time to upend conventional wisdom on 'corporate welfare'

Taxpayers are about to gain hard data on economic development tax breaks. Tens of thousands of governments will reveal tens of billions of dollars in spending never disclosed before. The data may rewrite the book and challenge conventional wisdom about "corporate welfare" spending.

America's Top States for Business 2017: The full list

The accounting rule is Governmental Accounting Standards Board Statement No. 77 on Tax Abatement Disclosures. GASB is the group best known for requiring states and localities to disclose how much they owe for retiree pensions and health care. GASB is actually not a government body, but rather a professional standard-setting body that controls Generally Accepted Accounting Principles, or GAAP, for the public sector. Governments adhere to GAAP for three main reasons: Some states mandate it, Wall Street likes GAAP accounting when it gives credit ratings, and some federal aid requires it.

GASB 77 took effect for calendar 2016 and beyond, so as governments close their books and report the prior year's spending, most will include a note, pursuant to Statement 77, disclosing how much revenue they lost to each economic development tax-break program. Because most cities, counties and school districts are on fiscal years ending June 30, most of this new data will arrive late this year.

Foreign auto '"transplant" megadeals

Parent company	Subsidy value($)	Year	State	Jobs data	Investment data($)
Nissan	1,250,000,000	2000	MS	4000	1,430,000,000.00
Volkswagen	554,000,000	2008	TN	2000	1,000,000,000.00
Hyundai Motor	410,000,000	2006	GA	2500	NA
Toyota	354,000,000	2007	MS	2000	1,300,000,000.00
Volkswagen	263,300,000	2014	TN	2000	600,000,000.00
Daimler	238,000,000	1993	AL	NA	NA
Hyundai Motor	234,600,000	2002	AL	2000	1,000,000,000.00
Volvo	212,000,000	2015	SC	2,000 - 4,000 jobs by 2030	500,000,000.00
Nissan	200,000,000	2000	TN	2000	1,000,000,000.00
Honda	158,000,000	1999	AL	1500	NA
BMW	150,000,000	1992	SC	NA	NA
Toyota	147,000,000	1985	KY	3000	800,000,000.00
Toyota	146,500,000	2013	KY	750	360,000,000.00
Honda	141,500,000	2006	IN	2000	550,000,000.00
Toyota	133,000,000	2003	TX	2000	NA

Good Jobs First

We expect the new data will reveal sharp differences and lots of hidden surprises. But the data will be crude and hard to access. Governments won't be required to name company names; they will only report one dollar figure per program per year. And in all but one state, the data will reside in individual governments' financial reports, usually in PDF documents.

Only New Mexico, thanks to State Auditor Tim Keller, has committed to collecting GASB 77 data electronically and making it accessible online. Keller, a former state senator whose incentive disclosure bills were vetoed by both a Democratic and Republican governor, wants taxpayers to immediately enjoy a more informed debate about the state's actual spending priorities.

Good Jobs First is also soon to launch Subsidy Tracker 2, where we will collect and publish GASB 77 data. (Our longstanding Subsidy Tracker database collects company-specific incentive data.)

In all 50 states, the GASB 77 data will likely spawn a whole new cottage industry of journalists, academics and nonprofits "wrangling" the data, then analyzing it from many perspectives.

Taxpayers will be enriched by the ensuing debate.

— By Greg LeRoy, director of Good Jobs First, a nonprofit research center on economic development subsidies

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