The days of the government sweetening the pot to lure new businesses with a juicy, public dowry appear to be numbered, and rightfully so.
A legislative measure given thumbs up so far by state political leaders would cap the amount of tax money companies could recoup under current state enterprise zone rules.
House Bill 13-1142, which has the support of top Democrats controlling the state House, Senate and governor’s office, would limit to $1 million how much a business can claim each year in state tax benefits for doing business in enterprise zones.
Even more telling, a comprehensive New York Times investigation last month revealed that such there is essentially no correlation between tax incentives like these and economic development or job growth.
In short, it’s just free money for businesses and does not for the most part equate to more jobs, better jobs or better pay.
The Times article pointed out that local, state and federal government officials hand over a whopping $80 billion a year to companies for expanding or creating new business. Sort of.
In many cases, the incentives are actually tax credits for tax money generated that wouldn’t have been created if the business hadn’t opened with the public bait. The argument for these incentives is that the businesses get to keep new tax money created, not existing tax money as a gift. In theory, the government sees a net gain.
But what the New York Times piece and numerous tax-incentive critics say is that it’s all nothing more than a shell game. If Aurora were to offer the XYZ Mall Co. $10 million in tax incentives to build a fancy new mall one mile east of the Town Center of Aurora mall, the chances would be good that it would simply siphon retail sales and jobs from the existing shopping center.
From city to city, there might be a net gain for such shenanigans, but within a region, it’s just a shell game. It all becomes municipal one-upmanship where the public at large loses tax dollars for the sake of competition.
In Aurora, two big offers for tax incentives came up short last year. Big money promised for a massive Gaylord hotel and conference center and a solar panel factory resulted in nothing more than headlines. Too often, incentive critics say, these deals don’t pay the public what they promised even if they come to fruition. Businesses produce fewer jobs or generate weaker sales than promised. Most would agree that a business plan dependent on government incentives is too poor a plan to get backing, and that there are myriad more important and influential aspects to economic development.
The problem is, local and state governments are convinced that they must have the ability to give businesses something for nothing or they’ll lose business to competing communities.
Probably not, is what the Times analysis shows. Time and again, Colorado economic development experts say that what really matters to businesses wanting a new location, to expand or to start from nothing, is a community that values quality of life. Good roads, good schools, safe homes, affordable colleges, a reliable fire and police department, manageable regulations and a solid technological and transportation infrastructure are far more important than cash bait.
Aurora and state officials should gather with other communities and agree to end the insanity once and for all, together. This doesn’t mean there should be an end to urban renewal programs, which need to be locally funded ways to raze eyesores to jump start redevelopment in truly blighted areas. It just means that as a community, as a state and as a nation, we realize that tax incentives really are nothing more than corporate welfare rather than reliable ways to stimulate new jobs and tax revenues.
I’m all for limiting business welfare as long as we limit personal welfare as well. Both to not fix problems and only contribute to poor work practices.
The New York Times speaks and I saw the light; revenue streams are more important for governmental agencies than corporate welfare through incentives.