Show Me the Value of Tax Incentives

While tax breaks for corporations continue to grow, as state and local governments essentially outbid each other to lure the promise of jobs to their region, experts continue to cast doubt on their value.

The latest prime example of this was the plethora of Americas cities in the running for Amazon’s second headquarters, which ended up being split between New York City and Arlington, Virginia.

Patrick Tuohey, director of municipal policy at the Show-Me Institute in St. Louis, recently examined his home state of Missouri in a piece for Governing.

Missouri is an interesting case because most of the fight over tax incentives occurs on the western edge of the state, as Kansas and Missouri conduct a newfangled border war. Businesses play the two states off each other, with Overland Park, Kansas, and Kansas City, Missouri, being the main beneficiaries.

Tuohey points out that as of last November, Missouri had 4,113 active state and local economic development subsidies worth nearly $6 billion. That ranks the Show-Me State 11th in the U.S., ahead of even California and Illinois.

But are they effective? The research says no. The St. Louis Development Corporation released a study two years ago that concluded the $709 million that city had spent on subsidies in the past 15 years did not yield job growth or economic revitalization. They also found that the level of reporting made it hard to track which projects were worthy of consideration for the tax incentives.

The Show-Me Institute commissioned a study by the University of North Carolina, who examined incentives in St. Louis and Kansas City between 1990 and 2012. They found “no support for the claim that [tax-increment financing] generated tangible economic development benefits in either Kansas City or Saint Louis.”

Tuohey said lawmakers and policy leaders must insist on clear and independent metrics to determine if and which incentives are actually effective in driving development. And they should regularly review them to ensure they are effective in creating jobs.

“Until cities and states adopt meaningful reforms, we can expect developers to continue asking for taxpayer subsidies whether the need is real or imagined,” Tuohey wrote. “And as long as politicians are willing to oblige the developers, taxpayers will be all the poorer.”

https://spectator.org/show-value-tax-incentives/

They are effective at getting politicians re-elected.

^^^ Yeah...
We have a huge amount of "tax-increment financing" in this state. Subsidies to attract business. Sold to and by a Republican state legislature. For what? Campaign funding from their lobbyists.

It's ridiculous. It puts smaller, and established businesses at a competitive disadvantage to give tax-favored treatment to larger businesses.
We are losing major corporations to places like Tennessee and Texas which have no state income tax. We should have gone that route. Give everyone the same low-tax environment rather than "targeting" some over others.

So push your politicritters not to do it. But good luck getting businesses to move there. Once the bears get fed, they're going to expect to be.

On one side you have politicians competing for votes by luring companies into their voting territory. On the other side you have companies competing for profits/revenue. The money is always going to flow toward the companies.

Whenever we've had companies come in to "raise the tax base", the politicians give it all away and them some.
The real proof is, did it lower your tax rate?
I have yet to see the answer is yes.
I don't blame the corporations. They are looking to make the best deal for the shareholders so they work each government entity against the other to get them to sweeten the pot.

They are around for the same reason our bizarre tax code is around. It put the politicians in the position to dispense favors.

quote:

Originally posted by chellim1:
For what? Campaign funding from their lobbyists.

Wouldn't curtailing that limit their "Freedom of Speech", vis-a-vis Citizens United?

Note: I think CU is BS and we should eliminate bribing, ummm, I mean lobbying of public officials.

quote:

Originally posted by chellim1:

We are losing major corporations to places like Tennessee and Texas which have no state income tax. We should have gone that route. Give everyone the same low-tax environment rather than "targeting" some over others.

Having no state income tax didn't change anything.

"Chattanooga’s Volkswagen plant has received more than $800 million in federal, state and local incentives in the past decade, making it the most richly awarded business ever in Tennessee and one of the most subsidized among U.S. automakers."

https://www.tennessean.com/sto...necessary/622157001/

Further, lawmakers here continually decry "bribes are a cost of doing business overseas" and adopt a holier than thou attitude.

How is the subsidy racket any different?

quote:

Originally posted by BBMW:
So push your politicritters not to do it.

I have advised my politicritters not to do it.

quote:

But good luck getting businesses to move there. Once the bears get fed, they're going to expect to be.

Did you read the article? It hasn't worked.
Businesses have been leaving the St. Louis area and the State of MO for lower-tax states ever since the City earnings tax was implemented. Do you really think they wouldn't come if we had a lower income tax, applied more evenly?
Why do you think they move to Texas and Tennessee?