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.
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.
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.
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