Do Business Incentives Create Jobs? Idaho Is One Of 13 States In The Dark
The state of Idaho will give up an estimated $845 million this year in the form of tax credits and exemptions. And only a select few at the Idaho Tax Commission know exactly where that money goes.
Idaho’s law is pretty clear, individual and business tax information is confidential. Tax returns, specifically, are confidential under federal law. But some states have set up reporting requirements for businesses to disclose which state-specific incentives they’re using (think tax credits and exemptions), and how much those are worth. Idaho isn’t one of those states.
“We’re not advocating the disclosure of tax returns,” says Greg LeRoy, the executive director of the non-partisan organization Good Jobs First. “This is about saying, if you claim a corporate income tax credit on line 39C of your Idaho tax return, it’s no different than if the state wrote you a check.”
LeRoy has been an advocate for open government and tax incentive transparency for more than two decades. “None of it should be hidden from taxpayers view,” LeRoy says. “There is really a business fairness issue here, because there is a burden shift going on, when companies do get these credits, people should have a right to see who is getting them, how much they’re worth and what kind of bang for the buck the taxpayers are getting in terms of job creation and wages and all that good stuff.”
If the state
gives up an estimated $845 million in revenue this year, it’s assumed someone else is on the hook for that foregone revenue. “Everyone else has to pay higher taxes or everybody else gets lousier public services because the state is giving up that revenue — or a little bit of both,” says LeRoy.
You might remember back in November we started asking questions about Idaho’s tax credit programs. We wanted to quantify exactly what the state and taxpayers were getting in return for offering incentives to businesses. Were jobs being created? Were businesses moving to Idaho because of the incentives offered here? We hit dead ends on the data side of things, but we were able to better understand the system.
Idaho currently has 27 different tax credits on the books. The most popular of which is the Investment Tax Credit.
The Tax Commission estimates the state will lose about $260 million in 2012 because of those credits. Sales tax exemptions, on the other hand are estimated to total about $585 million in foregone revenue in 2012 (this only includes goods and specific uses not taxed).
The policy question we asked a lot about last year was, do tax incentives pay off? The verdict was mixed.
That’s not a debate to be rehashed here. Now, we’re asking, what is transparent enough?
One person who agrees with Greg LeRoy about incentive-openness is a man who is intimately familiar with Idaho’s policy and the Tax Commission. Stan Howland is a retired auditor at the Tax Commission. He was the whistleblower who came forward in 2008 saying the state was losing millions of dollars because of secret tax deals businesses were striking with tax commissioners. Two investigations found nothing illegal occurred at the Commission. (You can read much more about that story here).
Howland believes the deals were illegal, at the very least, he says it was unfair and highly secretive. “Nobody knows who got a deal or how much it was. That’s what I was fighting,” says Howland. At the time, Howland attempted to open the deal-making process through legislation, similar to a law in effect in California. It didn’t go anywhere.
“Idaho operates on a complete, total secrecy system. No matter what a taxpayer does, nobody has a right to know it,” Howland says.
While Howland’s case doesn’t deal specifically with business tax credits and exemptions, it does speak to the policy decisions that have been made
with regard to public information.
Two longtime Idaho policy-makers say the state is transparent enough. Senate President Pro-Tem Brent Hill (R-Rexburg) is a retired certified public accountant. He understands taxes. And for him, confidentiality is paramount. “Just like you and I wouldn’t want someone to go in and see how much taxes we’re paying or how much we’re getting in credits and so forth, you’ve got the same situation with businesses,” Hill says.
House Revenue and Taxation Committee Chairman Dennis Lake (R-Blackfoot) agrees. “It shouldn’t be our concern as to, is John Doe getting and incentive, and Jane Doe is not?…it’s nobody’s business,” says Lake.
There have been a handful of recent cases in Idaho where the public has known about company-specific incentive deals. The Legislature crafted specific tax breaks for Micron Technology and Areva Inc. in 2005 and 2008, respectively. Then this year, the Legislature passed a new sales tax exemption for airplane parts installed on out-of-state planes. That measure was targeted for Boise-based Western Aircraft.
Some states have entire websites dedicated to making sure tax incentive information is public. Missouri has an online ‘accountability portal‘ which produces company-specific data for six of the biggest tax credit programs in the state. You can search the site by legislative district, company or tax credit category. So, you can see which local vineyards received a wine and grape tax credit in 2011, and how much that credit was worth.
According to a report from Good Jobs First, 37 states publicly disclose some tax incentive information. Idaho is one of 13 states that doesn’t.
There was a bill introduced in the Legislature this year to take a step toward disclosure. Rep. Brian Cronin (D-Boise) proposed the Corporate Tax Incentive and Accountability Act. It would have required companies that got $40,000 or more in state incentives to report the number of jobs created by that perk. It never made it out of Rep. Lake’s committee.
“I remember reading through it,” Lake says. “I’m the guilty party as to why it didn’t get a hearing…I didn’t think it was worthy of a hearing.”
What IS Public Information in Idaho
- Estimates of foregone revenue (tax money the state opted not to collect) due to income tax credits
- Estimates of foregone revenue due to specific sources of income not taxed
- Estimates of foregone revenue due to sales tax exemptions, goods not taxed, services not taxed, and specific entities not taxed
- Property tax exemptions are available at the county level
- Workforce Development Training grants are available through the Department of Labor
What IS NOT Public Information in Idaho
- Specific corporations or small businesses that use Idaho tax credits or exemptions
- Dollar amount of each tax credit or exemption given to specific corporations or small businesses.
- The number of jobs created or retained by a business using a tax credit program aimed at job creation, and the wage rates for those jobs
- Compliance or performance reports
- Outcome of the tax incentive or exemption (did the business do what it promised?)
Rep. Lake, doesn’t think disclosure legislation would get very far in Idaho. “It’s not something that concerns me because I have a lot of confidence in our Tax Commission,” he says. “I wonder if that isn’t just a curiosity thing more than really something that matters as far as tax policy, it’s just to satisfy people’s curiosity…like reporters.”
Greg LeRoy says it used to be the common argument among states that disclosing business tax incentive details would hurt a states’ reputation for having a good business climate. LeRoy says there is no evidence of that happening. “We think that over time states that are still secretive are going to become more marginal and less attractive, frankly,” LeRoy says.
He says since most states, 37 of them, disclose some information, the states in the dark aren’t at an advantage. “If every state is to some degree in the sunshine, why would a state continue to hide this information?”
LeRoy says it’s not just journalists or watchdog groups who seek the information, he says competing businesses want to know too.
Retired Tax Commission auditor Stan Howland thinks another scandal is the only way policy-makers in Idaho will seriously consider opening tax incentive details to the public.