Are public subsidies to corporations a smart way to encourage development (and jobs) or just taxpayer-funded corporate welfare? Louise Story has addressed this question in an excellent three part series for the New York Times, “The United States of Subsidies.”
A Times investigation has examined and tallied thousands of local incentives granted nationwide and has found that states, counties and cities are giving up more than $80 billion each year to companies. The beneficiaries come from virtually every corner of the corporate world, encompassing oil and coal conglomerates, technology and entertainment companies, banks and big-box retail chains.
The cost of the awards is certainly far higher. A full accounting, The Times discovered, is not possible because the incentives are granted by thousands of government agencies and officials, and many do not know the value of all their awards. Nor do they know if the money was worth it because they rarely track how many jobs are created.
So much for accountability. States (including Alabama) don't have information on how many jobs these subsidies bring in and how much new tax revenue they generate. And of course, the corporations aren't about to answer the basic question of would you have created these jobs here even without the subsidies?
The NYT has created a searchable database of all the subsidies they were able to identify. For Alabama, that amounts to at least $277 million — $58 per Alabamian or 4% of the state budget. The biggest recipient of our largesse is Airbus (EADS) at $158 million. The company is locating a new assembly plant in Mobile. Would they have come to Alabama without the subsidy or with a lesser amount?
We'll never know, but we do know that EADS North America boasts of facilities in 10 other states. Of those 10, only Kansas admits to providing a subsidy, in the amount of $23,200. The SubsidyTracker database, from Good Jobs First, also finds no Airbus subsidies from states other than Alabama and Kansas.
[Recently] The Wall Street Journal reported that ThyssenKrupp, a German manufacturer, decided to sell the largest, and newest, steel plant in America. It cost $5 billion to build and has been open for less than two years. The state of Alabama gave the company $1 billion in subsidies — most of which is now gone for good. That’s a lot of money. That’s crazy money. Which raises the question: How much crazy will it take for this kind of silliness to stop?
Concern over out of control subsidies is not a liberal or conservative, Democrat or Republican issue. For instance, the preceeding paragraph was penned by John E. Sununu, a former Republican Senator from New Hampshire. This is a common sense, pragmatic, taxpayer issue, not a partisan one.
Are the jobs worth the cost to taxpayers? We'll never know because Alabama has no evaluation program in place to show what we get in exchange for $277 million in corporate gifts. A recent Pew Research Center report indicates that most states, like Alabama, don't properly evaluate the effectiveness of tax incentives and other “job creation” giveaways. Our public officials are blindly throwing money at corporations and thankful to get any crumb of economic development in return … plus a photo-op at the groundbreaking ceremony.
This is important. Every dollar spent on tax incentives, infrastructure or other giveaways to attract business and jobs is a dollar local and state governments can't spend on education, health care, transportation for the rest of us and critical government services. As the recent Medicaid funding crisis illustrated, Alabama doesn't have any dollars to spare. Incentive programs ought to be monitored to make sure taxpayers are getting a good deal, not just giving free money to corporations.
Instituting a monitoring/evaluation system to track corporate giveaways would be a much better use of our Legislature's time in the next few months than another legislative session devoted to probing ladyparts and making life miserable for immigrants.