Over the weekend, the New York Times took a hard look at the tax breaks and other incentives state and local governments dole out by the billions to lure businesses. As the magnitude of those gifts has increased over the years, corporations have learned to shop for the most lucrative deal, dangling the promise of jobs and an economic boost to convince state and local governments to gut themselves of future revenue.
Sniffing out those incentives has become a business in itself, and nowhere is that business booming like in Texas. The Times calculated that the state hands out $19.1 billion per year in business incentives, mostly in the form of property tax breaks or sales tax rebates. That comes out to $759 for every man, woman, and child in the state.
State officials justify the largesse by pointing out that Texas is home to half of all the private sector jobs created over the last decade nationwide, the Times reports.
Yet the raw numbers mask a more complicated reality behind the flood of incentives, the examination shows, and raise questions about who benefits more, the businesses or the people of Texas.Along with the huge job growth, the state has the third-highest proportion of hourly jobs paying at or below minimum wage. And despite its low level of unemployment, Texas has the 11th-highest poverty rate among states.
"While economic development is the mantra of most officials, there's a question of when does economic development end and corporate welfare begin," said Dale Craymer, the president of the Texas Taxpayers and Research Association, a group supported by business that favors incentives programs.
Businesses in these cases argue they bring economic development -- and therefore tax revenue -- that would not otherwise exist, justifying the incentives. Then again, particularly during the recession, businesses have raked in cash while local school districts have struggled under draconian funding cuts.
Then there's the question of whether the businesses are in it for the long haul. The Times examines the case of Amazon, which last year closed a distribution plant in Irving after winning major incentives just six years before. What drove it away? The state's attempt to collect $269 million in sales tax.
And this wouldn't be Rick Perry's Texas without hints of cronyism and conflict of interest. At the center of the incentives boom is Dallasite and former City Council candidate G. Brint Ryan, whose namesake company represents Exxon Mobil, Raytheon, and scores of other firms seeking incentives in Texas and elsewhere. He's a regular at the office of Comptroller Susan Combs, to whose campaign he and his employees have given more than $600,000, and he and his wife have given more than $4 million in political donations in the past dozen years. Several Perry administration officials and current and former lawmakers have found their way onto the Ryan, Inc. payroll.
The takeaway: Whether incentive deals are a net positive for the people of Texas is a fun debate, but there's no debating that it's huge corporations and their lobbyists who benefit the most.
