Building vs. Buying Our Economy
BY RON SHULTIS
While most people are rightfully celebrating the end of 2020 and the beginning of the New Year, 2020 wasn’t going to go down without a fight. In the final days of the year, the awful and wacky 2020 mojo struck again, and this time it was Tennessee taxpayers who suffered. By the end of every year, the state government has to issue a little known report detailing how much corporate welfare dollars in tax credits the state gave out over the previous fiscal year. A lot of this money is used to recruit companies to come invest and “create” jobs in Tennessee. It is released with little fanfare, and with few details. But what we do know is disturbing.
Last year, Tennessee gave over $176 million in tax credits to companies. These credits are part of the normal job and industrial tax credit programs that the state gives out every year. This year’s $176 million however was in the midst of declining revenues and economic uncertainty as a result of the ongoing COVID-19 pandemic. But even worse, the real number is probably higher. Every year, this report gives a corrected number from the previous year, and every year since the report’s first year of publication, the state has had to increase last year’s number by over $50 million on average. So the odds are the state gave well over $200 million in taxpayer dollars.
Lastly, the report comes with a dark warning. Not only did the state give out millions of dollars, but the report states that there are nearly $800 million in credits the state has awarded that companies haven’t claimed yet. With continued economic uncertainty, we could easily see these companies looking to lower their taxes and claim this massive amount which could wreck the state’s finances.
There are many issues surrounding these corporate welfare tax credits. First, there is little transparency around them as we don’t know who received them. Plus, they have been shown to be completely ineffective, influencing company relocation and expansion decisions by as little as two percent.
But the even bigger question to ask is this: do we really think the most effective way to expand our state’s economy is to pay select large companies to come here rather than build them here? If instead of giving taxpayer dollars to a select few, we focused on things that would help all businesses, we could grow our economy in a fairer and far cheaper way. Imagine if we eliminated unnecessary red tape and made it easier and cheaper for a new business to start here. Or as our CEO recently pointed out, if Tennessee created the nation’s broadest regulatory sandbox program, we could make Tennessee the best place for innovators or entrepreneurs from across the country to invent and start a business. Think of it this way: instead of admitting the hub of innovation will always be places like Silicon Valley or Seattle and then trying to pay companies like Amazon to come here, let’s do everything to make Tennessee the place where the next Jeff Bezos wants to live, start, and grow their business. By focusing on efforts that improve the landscape for all businesses, we can give more homegrown businesses a chance to thrive and succeed and hire workers right here in Tennessee. Plus, we wouldn’t have to spend millions in taxpayer dollars. Let’s hope the state’s new year resolution for 2021 was more responsible spending of our money.