Report: Slashing Ineffective Corporate Subsidies Can Bolster State Budgets

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Mar 21, 2011, 02:16 ET

WASHINGTON, March 21, 2011 /PRNewswire-USNewswire/ -- Eliminating or reducing ineffective corporate subsidy programs can make a significant contribution to the efforts of state governments to address budget deficits, according to a report released today by Good Jobs First, a non-profit, non-partisan research center based in Washington, D.C. The report, Slashing Subsidies, Bolstering Budgets, is available at www.goodjobsfirst.org.

"Billions of dollars are being wasted each year on subsidies that fail to deliver on their intended purpose of creating jobs and growing the tax base," said Good Jobs First Executive Director Greg LeRoy.

The report presents ten case studies of wasteful programs that cost a total of $2.8 billion per year. "These are just a few of the subsidies states could target instead of cutting vital services such as education," said Philip Mattera, Research Director of Good Jobs First and principal author of the report.

Among the programs' problems are:

Cost. Some divert enormous amounts of money. Louisiana's Industrial Tax Exemptions cost some $745 million annually.

Poor or undocumented job results. Most have been criticized for failing to create or retain many jobs. Programs such as New Jersey's Urban Enterprise Zones have been found to produce zero or even negative job growth.

Disproportionate shares going to large corporations that need help the least. In Iowa's Research Activities Credit program, more than 80% of the tax breaks go to fewer than a dozen large firms.

Awards to poverty-wage employers. Among the recipients in programs such as New York's Industrial Development Agencies have been large retailers such as Wal-Mart that don't provide family-supporting wages or benefits.

Poor accountability practices. Many of the agencies running the programs do a poor job of tracking how money is spent and whether desired outcomes are achieved. The lack of clear standards in Pennsylvania's Keystone Opportunity Zone program caused one official to call it "legalized tax evasion."

Given these drawbacks, reconsideration of such programs would make sense at any time, the report argues. There are precedents for curtailing subsidies to deal with budgetary problems. California is currently considering abolition of its underperforming Enterprise Zone program.

Yet there are still scores of costly and ineffective programs that remain untouched. Scaling back these subsidies would probably not solve the budget gap in any state, the report acknowledges, but it would make a significant contribution to the effort.

Contact: Michelle Lee 202-232-1616 ext. 210

SOURCE Good Jobs First