As the nation turns its attention to the latest federal budget deal where curtailed spending and cuts are the defining principal, a dozen blue and red state governors are in a bidding war recklessly offering to spend billions for tax breaks and other public-paid subsidies to lure the corporate giant Boeing to build its next-generation aircraft factory.
Beyond the schizophrenic spectre of congressional negotiators saying no to spending as governors are offering mountains of cash is a maddening reality: these taxpayer subsidies do not create the promised jobs or investments, a series of striking academic studies have found. All they do is boost bottom lines by cutting corporate costs.
“Economic development officials value business tax incentives as tools needed to compete with other states,” a November report commissioned by New York State’s Tax Reform and Fairness Commission began, stating their presumptive selling point. “There is, however, no conclusive evidence from research studies conducted since the mid-1950s to show that business tax incentives have an impact on net economic gains to the states above and beyond the level that would have been attained absent the incentives.”
The 143-page study, produced by Marilyn M. Rubin of John Jay College and Donald J. Boyd, the former director of the Rockefeller Institute of Government State and Local Government Finance research group, was not alone in this conclusion.
“We estimate the impact of manufacturer business taxes on value added during the 1990s for 15 manufacturing sectors in 20 U.S. states,” began a National Science Foundation report published this past June. “When we isolate the value of industrial incentives from the basic tax system in our theoretically preferred marginal tax measure, we find… only 1.2 percent industrial growth, the latter elasticity not statistically different from zero.”
Zero. Think about that. Right now the federal government is curtailing spending on a vast array of needed initiatives–from social safety nets to next-generation weather satellites. And in state and local government, which is the frontline for services and will face the consequences of federal budget cuts, yet another corporate giant is seeking and being offered billions–even as experts say those subsidies are worthless for creating jobs.
“When combined with many previous reports, the Rubin and Boyd [New York State] study shows that state and local giveaways to corporations simply redistribute wealth upward without increasing jobs,” wrote David Cay Johnston, a former Pulitzer Prize winning New York Times taxation reporter for TaxAnalysts.com. “Their continued existence is a testament to the benefits of being politically connected.”