The Virginia program included in the study, the state’s Jobs Investment Program, disbursed 91 percent of the $36.6 million it awarded between 2011 and 2014 to big businesses, according to the study.
The survey shows that such programs “flunk the definition of the word incentive,” because a state tax break or subsidy is of far less importance to a large corporation than a small business, said Greg LeRoy, executive director of Good Jobs First.
“If you’re talking about giving a tax break to one of the Fortune 500 companies, you’re not influencing behavior,” LeRoy said. “This study is yet another form of evidence that these are just windfalls.”
Virginia’s secretary of commerce and trade, Maurice Jones, strongly defended his state’s program, calling it an essential weapon in Virginia’s competitive arsenal. He said the state has other programs aimed specifically at small businesses.
For instance, the state-supported Center for Innovative Technology, a nonprofit located in Herndon, offers investments and help to start-ups, and the center’s Mach 37 accelerator targets small, promising cybersecurity firms.
“You need incentives to compete,” Jones said in a telephone interview from Dubai, where he was on a trade mission. “Without incentives, you are basically giving up a very effective competitive tool.”
Jones said that because the Jibs Investment Program bases awards on the number of jobs created, it was unsurprising that most of its benefits went to larger companies. He noted that the retraining component of the program has a lower qualifying threshold for smaller businesses, aimed at facilitating their participation.
Most of the state programs included in the study awarded benefits to job-creating companies in the form of tax credits or abatements. The Virginia program provides direct funding to companies as well as consulting services for recruitment and training, according to the description on the state’s Web site.
DuPont, Tyson Foods and Home Depot were among the large corporations receiving aid from the Virginia program, according to the watchdog group’s study.
Small businesses – defined as those with 500 employees or less – generate 46 percent of U.S. gross domestic product, about half of all private-sector jobs and 64 percent of net new private jobs, according to the federal government’s Small Business Administration.
To conduct its analysis, the group said it reviewed 4,228 incentive awards handed out by 16 programs in 14 states: Florida, Indiana (two programs), Kansas,
Kentucky, Louisiana, Missouri, North Carolina, New Mexico, Nevada, New York (two programs), Pennsylvania, Vermont, Virginia and Wisconsin.
LeRoy’s group said it used a more restrictive definition of small businesses, those with 100 employees or less that are locally based and independently owned. He said his group adopted this definition because it tracked more closely with the experiences of business owners the organization had surveyed.
LeRoy’s group recommends reforming state incentive programs by narrowing eligibility requirements to exclude large businesses, or at a minimum reducing the aid going to them by imposing caps.
And he said that in the long run, states would be better off redirecting their funds to strengthen the overall business climate through improving schools and transportation systems and alleviate what small business owners identify as their greatest problem: access to credit.
“Over and over, voluntarily, they say the biggest issue is the credit crunch,” he said.