An exhaustive state-by-state examination of tax credits, rebates and other incentives state governments use to lure new businesses and to keep existing businesses from relocating elsewhere suggests that all incentives are not created equal and, further, that states often do not get a good return on their investment.
[Clarification: According to Global Data Systems CEO Chuck Vincent, his company received state backing on 60 percent of a $2 million bank loan his company obtained for a project, which comes to $1.21 million; GDS did not receive a corporate tax credit as the New York Times database indicates. Also according to Vincent, Global Data Systems has since paid back the loan in full.]
An exhaustive New York Times examination of tax credits, rebates and other incentives state governments use to lure new businesses and to keep existing businesses from relocating elsewhere suggests that all incentives are not created equal and, further, that states often do not get a good return on their investment.
The story, accompanied by an interactive gallery, focuses on Texas, by far the most aggressive employer of corporate incentives at $19 billion per year. Indeed, private sector job growth in Texas has far outpaced the rest of the nation, but:
[T]he raw numbers mask a more complicated reality behind the flood of incentives, the examination shows, and raise questions about who benefits more, the businesses or the people of Texas.
Along with the huge job growth, the state has the third-highest proportion of hourly jobs paying at or below minimum wage. And despite its low level of unemployment, Texas has the 11th-highest poverty rate among states.
"While economic development is the mantra of most officials, there's a question of when does economic development end and corporate welfare begin," said Dale Craymer, the president of the Texas Taxpayers and Research Association, a group supported by business that favors incentives programs.
Compared to our neighbor to the west, Louisiana's corporate incentives are miniscule - $1.79 billion per year - yet, relative to the rest of the nation and particularly to many other states with considerably larger populations, Louisiana's largesse to corporations is considerable. The vast majority of incentives to companies offered by Louisiana are in the form of corporate income tax credits, rebates or reductions, followed by property tax abatements and personal income tax credits. The energy industry is the single largest beneficiary, followed by film and manufacturing.;
Yet within Louisiana the city with the sturdiest economy and best economic growth over the last couple of years, Lafayette, is home to some of the fewest corporations benefitting from state incentives. Way down the statewide list of companies that have taken advantage of incentives is the Schumacher Group, which the Times lists as having received $9 million in 2011 in cash grants, loans or loan guarantees and free services. Next on the list in Lafayette is $1.72 million for Samson Rope Technologies (industrial tax exemption, property tax abatement and corporate income tax credit in 2009), followed by Global Data Systems with $1.21 million (corporate tax credit in 2009).
To see the data for Louisiana, click here. To read the Times' story, go here.