Legislators in 15 states have introduced bills that would block their governments from doling out tax incentives and subsidies through so-called economic development programs. Every state has used these programs, trying to convince corporations from Hollywood producers to sports teams to brand-name manufacturers to set up shop or stay within their borders.
State and local governments spend nearly twice as much on corporate welfare as they do on fire protection. It’s done through a combination of both direct payments and company-specific tax breaks: In Michigan, where I live, most incentives are cash payments. The same is true for the biggest giveaway programs in most states, such as Florida, where companies can get $3,000 “refunds” for each job they create. At least 35 states have handed out more than a billion dollars each, though many fail to report the true total.
Subsidies for Hollywood productions are among the most popular, with Michigan alone spending half a billion dollars between 2008 and 2015. National Football League teams worth billions of dollars each routinely get hundreds of millions of dollars in subsidies to build stadiums. Each state tends to reward its biggest corporate citizens: In Michigan, Ford, GM and Stellantis get the most; in Massachusetts, General Electric; in Louisiana, oil companies; and in Washington state, Boeing received the biggest tax break in history, worth $8.7 billion.
Such deals have deservedly spurred a massive public outcry. The Foxconn debacle played a major role in the 2018 gubernatorial race in Wisconsin, and the subsidy was subsequently cut by more than two-thirds. Widespread opposition even led Amazon to cancel its New York plans. (Amazon founder Jeff Bezos owns The Post.)
State lawmakers, representing various political bases, increasingly oppose these blatant handouts. No one has done more to draw attention to the issue than Dan Johnson, a progressive lobbyist in Illinois. In Michigan, the Senate Democratic leader and a key House Republican are leading the legislative charge. In Alabama and Utah, Republicans are in the vanguard. In Rhode Island, the Senate sponsor of the anti-subsidy bill is a Democrat, while the House sponsor is a Republican.
Despite their disagreements on other issues, these lawmakers share the view that states should compete on business climate and quality-of-life issues, not corporate welfare. They also have the facts on their side, as studies show that such subsidies can harm, not help, economic growth and almost always fail to drive the promised job creation.
Yet no state is willing to end its incentive program unless others do the same, fearing that unilateral disarmament would damage their economy. That’s unlikely: One study found that up to 98 percent of companies would make the same investment and expansion decisions without any tax breaks. Even so, state leaders aren’t willing to take the risk. Fortunately, the legislation under consideration in those 15 states is designed to overcome this hurdle.
Whether it’s Hawaii, Florida, Massachusetts, Pennsylvania or elsewhere, no bill currently under consideration would take effect on its own. If enacted, it would go live only after at least one other state passed the same measure. The goal is for many more states to enact the legislation simultaneously. It would then be illegal for all those states to reduce taxes or provide subsidies to entice specific companies to stay or relocate within their borders. Existing corporate welfare handouts would wind down until they disappear entirely. In short, the legislation creates an interstate compact to ban corporate welfare.
This concept is new, arising only in 2019. Yet the mounting interest from lawmakers across the country shows that momentum is building. Although no state has enacted anything yet, Utah is closest, with the interstate compact bill passing the House of Representatives in 2020. With each state legislative cycle, more lawmakers in more states introduce this policy. No wonder: Ending taxpayer giveaways to corporations has broad and bipartisan appeal.
This issue deserves at least as much attention as corporate tax rates. It’s a matter of respecting taxpayers and companies who pay their fair share. That’s a conversation America needs to have, and states are not only doing so, they’re moving toward the right decision.