Fix Failed Tax Subsidies

PSN has noted in previous Dispatches, these credits are costly, favor out-of-state workers, offer minimal to no returns, do not create permanent jobs, and place an excessive burden on taxpayers in a time of economic uncertainty.  The Massachusetts Department of Revenue recently determined that in twelve states that administer a film tax credit, the return is extremely meager-- finding that states were only getting back "$.0.07 to $.0.28 per dollar of tax credit granted."

Last Tuesday, Oregonians overwhelmingly approved two ballot initiatives that ratified legislative action last year to increase high-end personal income and corporate taxes.  The failure of the anti-tax movement in Oregon is one more in a long stream of right-wing initiatives rejected by voters at the ballot box.  In fact, progressive revenue generation as part of a balanced approach to addressing state deficits has been popular with both voters and legislatures for years.  This Dispatch will provide both the facts and messages to debunk opposition to smart revenue options, while outlining a few of the best revenue approaches to filling budget holes.

Two weeks ago, both the Director and Deputy Director of the Iowa Department of Economic Development (IDED), Mike Tramontina and Vince Lintz, resigned abruptly, and the manager of the Iowa Film Office, Tom Wheeler, was forced to step down following allegations of corruption and abuse of public funds. Specifically, an internal IDED audit discovered issues with the state’s film tax credit including improper oversight, the purchase of luxury vehicles unnecessary for the completion of films, and filmmakers claiming payments for multiple production jobs.

In this Dispatch, we emphasize that any stimulus spending has to be tied to increased accountability and transparency in spending decisions, especially by government contractors who often operate like a shadow government with little oversight.  One key reality is that those most in need often don't receive help from government spending without transparency and accountability measures built into the rules.  While the recent federal recovery plan made real strides in expanding such accountability, additional measures are still needed if the recovery plan is going to deliver real equity in our economic recovery.

According to a new study by Good Jobs First, state and local governments lost over $1billion in sales tax revenue last year as a result of laws that allow retailers to retain a percentage of the sales tax they collect.

The budget news is grim in some states.  Twenty states face a combined budget shortfall of at least $35 billion for 2009, according to analysis by the Center on Budget Policy & Priorities (see CBPP graph below). Another 8 states will likely have budget problems next year or the year after.

In the age of Google, citizens expect to be able to find core information on the Internet about government operations, but as a major new report being released today highlights, most states are failing on public transparency.

State creates economic development program to encourage business investment in the state. State hands out billions in economic subsidies. State finds out many companies have taken the cash and failed to deliver on promised jobs.

Target management apparently didn't get the memo. Faced with stagnating wages and increasing inequality, American workers and taxpayers are waking up to the big box gambit where irresponsible employers subsidize their low wages through favorable tax packages. When Target threatened to stop opening new stores in Chicago if the Windy City gave final approval to its ordinance requiring a living wage for retail workers (see this Dispatch for more details), it opened up a new debate over why cities are offering low-wage retail stores tax subsidies in the first place. As a new report produced by the Neighborhood Capital Budget Group documents, Target received $9.9 million in tax-increment financing (TIF) to subsidize its existing stores in Chicago.

State governments offer businesses tens of billions in tax incentives each year to invest in their states-- corporate subsidies that many advocates see as wasteful giveways but that others see as a lifeline for their communities.