In our opinion: Tax incentives for big companies need thorough scrutiny

It's become routine for large companies and developers looking for a place to build a new facility to check in with local governments to see what incentives and subsidies might be available to defray costs. And it's become the norm for public agencies to line up with competing offers to attract what they see as a new engine of economic growth.

Now there are welcome efforts in Utah to analyze whether the use of taxpayer-funded economic development incentives is truly beneficial to the community, or if they amount to a form of corporate welfare, as critics argue. And while it will be good to have solid data to clarify the true costs and benefits of such incentives, what is less clear is what kind of policy might result from the analyses.

Minus any over-arching regulation of how and what local governments can do to attract new development, it's certain that cities, counties and towns will continue their arms-race style of proffering incentives to host the next facility built by Amazon, Facebook, Google or any other prospective large-scale job creator.

A resolution before the Utah Legislature would compel state tax authorities to perform a comprehensive review of the use of tax incentives for new businesses to see whether they are a justifiable public investment in private enterprise. For example, was it necessary to offer Amazon $5.6 million in tax breaks in 2017 to build a distribution facility in Salt Lake City? Would the e-commerce giant not have built the center anyway as part of its business plan?

Separately, the nonprofit Utah Foundation has launched a wide-ranging probe into the use of economic development incentives and has preliminarily found that existing government data on the outcome of applied incentives is limited, making it difficult to evaluate their effectiveness.

In theory, incentives pay for themselves by facilitating job growth and enhancing the tax base. But it would be nice to know with certainty to what extent those benefits accrue over the long-term. Another question, which data analysis will not answer, is whether incentives are always crucial to attracting a corporate investment.

In any event, as long as governments are willing to offer up various subsidies, companies are not going to turn them down. In the current environment, companies need only to announce plans to search for a new headquarters site, or another large facility, and sit back and wait for local governments to come courting with open treasuries.

There is a prevailing public interest in knowing with confidence whether this "give-something-to-get-something" strategy actually delivers the bang for the bucks that taxpayers are doling out. Currently, incentives strategies are founded as much on hope and supposition as on actual fact.

Formal reviews of the use of incentives and their aftereffects in specific cases will be useful, if not enlightening. Hopefully, they will provide agencies with tools to offer taxpayers a clear cost-benefit analysis of any incentive package they find themselves compelled to offer when recruiting future development.

from Deseret News https://ift.tt/2Vy1PWd