Bringing the Economy Home

Open Government Advocate: Tax Incentive Details Should Be Public Info

Good Jobs First

Greg LeRoy founded Good Jobs First in 1998.

Good Jobs First is a non-partisan, non-profit government transparency advocacy group based in Washington, D.C.  It was founded in 1998 by Greg LeRoy, who is now executive director. LeRoy has been studying tax incentive transparency for more than two decades.  We recently spoke with him to learn more about what he considers ‘transparent enough,’ and what states are doing to open incentive information to the public. 

Q: What is transparent enough? What should people have the right to see?

A: Our position here at Good Jobs First is that tax incentives, whether they are property tax abatements or sales tax exemptions or corporate income tax credits or other types of tax based economic development subsidies, should be equally transparent.  None of it should be hidden from taxpayers view.

We think the source of the subsidy, that is, which agency or program the money came from, the recipient of the money, that is, the company or entity or developer that got the money or benefited from the money should be disclosed.  Also, the value of the subsidy and the purpose of the subsidy should be disclosed.

Was the company supposed to create 100 jobs or invest $10 million or perform certain research and development activity? And then taxpayers should be able to see the outcome of the deal.  How well did the company create 100 jobs, after a reasonable amount of time, or did they invest the dollars or do the R&D?  We think that should all be on the web, visible at least once a year, for every company, every deal, and every program.

Q: Idaho law says all tax information is confidential. How do states get around that?

A: So here’s an important distinction.  We’re not advocating the disclosure of tax returns.  There are some people who do advocate for that. This is about saying, if you claim a corporate income tax income credit on line 39C of your Idaho tax return, it’s no different than if the state wrote you a check.  It’s no different than if the county gave you a big property tax break. It’s no different than if the development agency gave you a big low interest loan. It’s no different than if the workforce investment board gave you a big training grant.

It’s all taxpayer money being spent in the name of economic development.  All those other kinds of tax incentives I just listed are all highly transparent.  You can see property tax abatements at the county tax assessor.  You can see training grants at the workforce investment board, you can see revenue bonds at the investment board.  We don’t think there should be a double standard for subsidies that are based on corporate income tax breaks.

So 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, and how much their worth and what kind of bang for the buck taxpayers are getting in terms of job creation and wages and all that good stuff.

Q: Washington state, for example, has written specific reporting requirements into tax incentive legislation as a way to get around the confidentiality of tax returns. Is that what most states are doing?

A: We see it done in different ways.  We see it done the way you describe, but we also often see it as a new bill specifically about sunshine which is then applied to a broad number of programs.  Illinois is an outstanding example of that. They passed a bill in 2003 that covers numerous programs and does a great job, starting in 2005, of disclosing them on their website.  In other cases, governors just do it administratively.

Q: What’s the fear with releasing this info?

A: About 16 months ago, for the third or fourth time, we issued a survey grading the states on how transparent they are in revealing company specific subsidy data.  At that point, 37 states had some degree of online disclosure.  Thirteen states including Idaho and Washington, D.C. were in the dark, and most of those are still in the dark. But some have since entered the disclosure column.

We sought that information, and we noticed a lot of the data was hidden on obscure websites and obscure reports and obscure appendices in non-searchable PDF pages or in ways that were not intuitive or easy to find.  So we decided to begin to capture that info electronically, actually hiring a software scraper to automate the capture of information from certain states’ websites.  We dumped it into a unified searchable database on our website called the Subsidy Tracker, and we now have some data on every state in the country.

“If you claim a corporate income tax income credit on line 39C of your Idaho tax return, it’s no different than if the state wrote you a check.”

Now, even for states like yours and many, the amount of data we have is small, and the number of programs covered sometimes, it’s only one program like your state.  But there is no state in the country now that can claim this so-called business climate advantage because it’s in the dark still. Nor can any state claim any kind of business climate harm because they’re transparent.

That’s the recurring theme we hear is the so-called business climate – business friendly signals that a state would harm its reputation for having a good business climate by being more transparent with economic development subsidies.  If there was any evidence from any level of government that anybody had ever harmed their business climate or their ability to retain employers or attract employers because of safeguards in place, I would have been confronted with that data – there isn’t any.  There no evidence that anyone has ever hurt their business climate.

Q: What is your hope for states like Idaho that aren’t releasing this info?

A: We think that over time states that are still secretive are going to become more marginal and less attractive, frankly.  We think overtime they will understand since almost every state is disclosing to some degree, either voluntarily or through our own subsidy tracking, that there is no advantage to being secret. But there is potential taxpayer resentment because frankly people have a right to ask now ‘what are you hiding?’.

If every state is to some degree in the sunshine, why would a state continue to hide this information?  And it’s not just tax payers or watchdog groups from the left and right interested in this data. It’s businesses. It’s economic development practitioners. It’s competing businesses. It’s site locating consultants who might be looking to bring jobs to Idaho.

This is not a corporate bashing issue. This is a good government issue at its core.  This is about taxpayers right to see where their money is going.  Frankly, with so many states cutting services – cutting health care, cutting Medicaid, cutting public transportation, cutting aid to schools — people have every right to ask, ‘well how come there’s not enough money to pay for these things? How could we be reining in spending in other areas so public services are protected?’.

Q: Are you just talking about corporate tax breaks – what about small businesses? Should that information be public too?

A: Usually we recommend cutoffs that exclude most small businesses.  But frankly, we know there is a real bias in the distribution of dollars and deals.  The system is really dominated by big businesses.  Businesses that have the greatest ability to threaten to move across state lines. Companies that have the greatest ability to hire teams of tax consultants and lawyers and to lobby for changes in tax code to benefit their industry.

Small businesses really often don’t benefit much from these programs because they aren’t the ones that really play the game.  Small businesses tend to be more loyal to their states, less likely to run away, more rooted in the community.  We think by making the whole system more transparent, that would favor making them more balanced and helpful to small businesses.


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