Good coverage by Hunter Field in the Arkansas Democrat-Gazette this morning on a report and discussion at the Legislative Joint Audit Committee on the value of corporate welfare — handouts of state money to private businesses.
Do they work?
The central question remained unanswered. That is, are location decisions really based on incentives or is the dough merely a sweetener for plants that would locate here anyway? The state argument is that everybody does it so we have no choice but to hand out cash.
Auditors claim a positive revenue impact from some major giveaway programs — a position challenged to a degree by a well-known corporate welfare critic, Jacon Bundrick, who teaches economics at UCA. (Irony note: Bundrick operates in a research program at UCA subsidized by Koch brother riches and other anonymous wealthy people whose interest is in reducing their tax burden. Reducing corporate welfare — and thus government spending — is one path to that end, of course. Nonetheless, I’m with Bundrick on corporate welfare skepticism.) Bundrick said the evidence is lacking on the positive impact of corporate welfare in business decisions:
“We see time and again that incentives are not the deciding factor in a company’s location/expansion decision, but merely serve as a reward for doing as they intended,” he said in an email. “In these cases, incentives are a cost to taxpayers and provide no benefit. Put more simply, if the assumptions used in the analysis are invalid, how can we trust the results? We’re making real decisions with real taxpayer money using analysis we know to be flawed.”
The state auditors found that while their figures show a positive revenue impact from some major incentive programs, some incentives cost more than they produce.
Auditors reviewed 11 In-House Research and Development-Targeted Business incentive projects, finding that none had a positive cost effectiveness. The projects’ negative impacts on the state, auditors noted, were due in part to the high incentive cost of 33%.
But justifications were offered here, too: That the research might have long-term positive benefits.
Should the topic interest you, here’s the full report submitted to the committee yesterday.