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Tuesday, May 31, 2016

Subsidy Tracker Reaches Major Milestones

Subsidy Tracker, the free subsidy database created in 2010 by Good Jobs First, has reached major milestones in its coverage of state, local, and federal subsidies.

This month's enhancements to the database bring it to a once-unimaginable 500,000 individual incentive awards with a cumulative nominal subsidy value of $250 billion! That's starting to add up to real money!

I explained two years ago how to use the data from Megadeals or Subsidy Tracker to compare a proposed economic development incentive package with past subsidies given in the same industry to get some idea whether the proposal represented a gross overpayment for a given investment. This method relies on finding good matches by industry, location, unemployment rate, and so on. The more deals available to search means your chances for finding good comparables improves proportionately. This can only enhance the ability of citizens' groups, labor organizations, etc., to independently analyze proposed costly incentive packages.

As Philip Mattera, Good Jobs First Research Director, says, the steady expansion of Subsidy Tracker "reflects the improvement in government transparency over the past decade." I can personally remember when the first statewide transparency law was passed in Minnesota in 1995; transparency has improved exponentially since then, although there is much progress that still needs to be made.

One notable recent innovation in Subsidy Tracker is a matching system to determine the ultimate corporate parent of subsidy recipients. According to Mattera, it now includes 2,606 parent companies, a threefold increase since 2014. This is critical information, given that so many companies hide their corporate connections through misleading names.

Although transparency remains an elusive goal, it's worth celebrating successes when they occur. Cheers!

Cross-posted at Angry Bear.

Sunday, May 8, 2016

Kansas City event analyzes the border war

As I noted last time, there is finally a real possibility that the $200+ million job piracy border war between Kansas and Missouri could have a real, legally binding truce. As we wait to find out if this materializes, American Public Square in Kansas City is sponsoring a public forum Wednesday, May 11, at the Plaza Branch of the Kansas City Public Library at 6:00pm.

"Cents and Sensibility" will examine the pluses and minuses of economic development subsidies, turning to research on the effects and effectiveness of these incentives, whether it can be justified to give subsidies to private enterprises, and who benefits from subsidy programs.

I will be taking part in this event, which has an interesting format: no presentations, just questions from the get-go, and a roving reporter who acts as a real-time fact checker. The other panel participants are:

Bill Hall, President, Hall Family Foundation
Michael Farren, Research Fellow, Mercatus Center, George Mason University
Moderator: Dr. Scott Helm, Director of the MPA program at UM-Kansas City's Henry W. Bloch School of Management
Roving Reporter: Steven Steigman, Chief of Broadcast Operations, KCUR 89.3

Be there or be square!

Monday, April 18, 2016

Breakthrough in Kansas-Missouri Border War

Via @goodjobsfirst, we learned Friday that Kansas Governor Sam Brownback had made a major response to Missouri's proposed jobs truce in the Kansas City region.

As regular readers may recall, studies have shown that more than $200 million has been spent moving jobs back and forth across the state border in the Missouri and Kansas counties surrounding Kansas City. This is to create 0 new jobs. Despite this being perhaps the country's second-largest border war after the New York City area, Governors Jay Nixon (D-Missouri) and Brownback (R-Kansas) in December 2012 both told New York Times reporter Louise Story, on camera, that they had no plans to end the incessant job piracy.

Nevertheless, in July 2014, Nixon did an about-face, signing a bill from the majority-Republican legislature to end the availability of state subsidies to be used for such job poaching. Unlike the voluntary no-raiding agreements I have discussed on previous occasions (Council of Great Lakes Governors, NY-NJ-CT, Kansas-Missouri, and even Australia's Interstate Investment Cooperation Agreement), this has the force of law. The four counties making up Kansas City would be completely barred from using state subsidies to give relocation subsidies to companies in four bordering Kansas counties, if Kansas passes comparable rules.

Now, facing an August 2016 deadline in the Missouri law for the truce to take effect, Brownback ordered the Kansas Department of Commerce to disapprove PEAK (Promoting Employment Across Kansas) subsidies for job piracy, and asking for legislation to formalize this policy.

Brownback's proposal differed from the Missouri law by allowing PEAK subsidies (and the corresponding Missouri Works program) to be used for piracy if a company invested at least $10 million in new construction. While this means really large projects would not be affected by the truce, it would kill off the dozens of deals made by what Brownback called "lease jumpers," who simply move from a leased facility in one state to a leased facility in the other to cash in on the subsidy programs.

Good Jobs First today lauded the progress on the truce, noting the five years of both public and behind-the-scenes work by Hallmark and 16 other prominent Kansas City companies to promote sanity. Good Jobs First, of course, has conducted a great deal of research on job piracy, including the 2013 report, The Job-Creation Shell Game. Executive Director Greg LeRoy expressed hope that this potential agreement would be "a wake-up call" for the National Governors Association, which he called "MIA" on the issue of job piracy since 1993.

This is not yet a done deal. However, the proposal to meet legislation with legislation would create an unprecedented advance in stopping job piracy.

Monday, April 4, 2016

It's official - Icelandic bankers have been jailed

If you've been following this blog over the last few years, you know that Iceland took the dramatic step of prosecuting top officers at the country's big 3 banks, all of which were allowed to go bankrupt in the wake of the 2008 financial collapse. Unlike Ireland, it did not turn bank debt into government debt, which increased Ireland's debt by close to 100% of gross national product (GNP) overnight. Though hit hard by the 50% drop of the krona, Iceland has managed a remarkable, though still incomplete, recovery marked by its renewed ability to borrow in foreign currency with less than a 1% risk premium and by achieving unemployment rates that Eurozone countries can only envy.

What you wouldn't know, if you just been looking at the headlines (Google "Iceland jails bankers" and you'll see what I mean), is that Iceland had not actually been jailing bankers. Here's a typical one from the BBC, "Iceland jails former Kaupthing bank bosses" (12 December 2013). In fact, nobody went to jail at that time: They were convicted, but all four Kaupthing officials appealed their sentences. If you search similarly titled stories, you will see that headline "jailings" were either convictions, or an affirmation of these lower court decisions by the Icelandic Supreme Court, neither of which actually led to immediate jailings. Indeed, one of the "Kaupthing Four," as they are now called, was living in Luxembourg (he had headed Kaupthing's Luxembourg branch), and I wondered to myself if could even be compelled to return to Iceland to serve his sentence.

Now I am happy to report that the Kaupthing Four are finally in jail in a minimum-security prison with only one road connecting it to the outside world, including the former CEO of Kaupthing's Luxembourg unit who was outside Iceland when his conviction was upheld. There have been an additional 22 convictions now at various stages in the appeals processes, and special prosecutor for the banking crimes, Olafur Hauksson, indicted five more bank officials for fraud and manipulating stock prices just last month.

As Kaupthing was Iceland's largest bank before the crash, jailing its top officials sends a reassuring sign that the rest of those convicted will eventually follow suit. Iceland thereby establishes a precedent we should continue to urge in the United States, United Kingdom, and elsewhere that bankers are not too big to jail.

A note to readers: Bloomberg reporter Edward Robinson had not replied to a request for some clarifications at the time this story was published. If any of you know when the Kaupthing Four reported to prison, whether there are other bankers already in jail, or other useful news, please send along the information and I'll be happy to credit you. Thanks!

Cross-posted at Angry Bear.

Tuesday, February 2, 2016

New OECD tax agreement improves transparency -- but the US doesn't sign and the US press won't tell you UPDATED

Last week 31 countries signed a new Organization for Economic Cooperation and Development (OECD) agreement providing for country-by-country corporate information reporting and the automatic exchange of tax info between countries under the Multilateral Competent Authority Agreement (MCAA).

Country-by-country reporting, the brainchild of noted tax reformer Richard Murphy,* is a principle that makes it possible to detect tax avoidance by requiring companies to list their activities in each country (nature of business, number of employees, assets, sales, profit, etc.) and how much tax they pay in each country. A company with few employees yet large profits is probably using abusive transfer pricing to make the profits show up in that country rather than another one, to give one obvious example of how the idea works. In the OECD agreement, the procedure is that beginning in 2016 each company will file a report to every country where it does business, then all the countries receiving such reports will automatically exchange them with each other, meaning each of these countries will then have a full view of how much business Google, for example, does in every jurisdiction. The shortcoming to this is that while governments will have this data, the public will not have it (a fact criticized by the Tax Justice Network) due to alleged concerns about confidentiality. However, the European Commission, including its Luxembourgian president Jean-Claude Juncker, is now talking about requiring publication of the country-by-country data for each EU Member State.

Which highlights an important aspect of this agreement: Many major tax havens, including Luxembourg, Ireland, Liechtenstein, Switzerland, the United Kingdom, the Netherlands, Belgium, and Austria have all signed on. But the United States did not sign it. Surprisingly, you can't find this out in any U.S. publication, as far as I can tell. I'm a subscriber to the New York Times, and a search for "OECD tax deal" or "OECD tax" for the past week (it was signed six days ago) yields no results. "OECD" yields one result unrelated to the MCAA. Ditto for the Wall Street Journal. Ditto for my premium Nexis subscription: No U.S. stories on the agreement. You'd almost think they're trying to keep us from finding out. But no, not exactly: The Financial Times was able to get Treasury Secretary Jack Lew himself to comment in its story on the MCAA. He said, “From a US perspective, there are elements of this that don’t require legislation and we’re looking to getting to work right away.”

That's certainly a clue: Some of the changes do require legislation, and getting that from the Republican Congress is not going to happen. In fact, Republicans have always been willing to step up to keep the United States a tax haven for foreigners, and the Bush Administration went out of its way to undermine previous OECD attacks on tax havens offshore, as Australian political scientist Jason Sharman masterfully showed in his book Havens in a Storm.

Republicans have done such a good job at helping out domestic tax havens that the United States is now "The World's Favorite New Tax Haven," according to Bloomberg Businessweek which, in an ironic coincidence, published the story at 12:01AM the day the MCAA was signed (so it didn't report on the signing either). According to the article, foreigners' money is pouring out of Swiss banks into the United States, and Rothschild has set up shop in Reno, Nevada.

A little too ironic...

* As regular readers know, Murphy is someone I frequently cite in these pages.

UPDATE: @AlexParkerDC from Bloomberg BNA was kind enough to send me to a couple of his posts on the OECD's Base Erosion and Profit Shifting (BEPS) negotiations. These suggest that the Obama Administration believes it can implement country-by-country reporting through regulation alone, and had already committed to it in the BEPS process. However, the IRS has proposed not to implement country-by-country until 2017, while the new OECD agreement begins with this year's tax information, as noted above.

Cross-posted at Angry Bear.

Friday, January 15, 2016

Champion Tax Avoider GE Gets Subsidized Relocation to Boston

On Wednesday, General Electric announced that it was going to relocate its headquarters from Fairfield, Connecticut, to Boston beginning in 2016. Even without the headline, you probably already guessed that the relocation was subsidized -- in this case, by both the state of Massachusetts ($120 million) and the city of Boston ($25 million). 800 jobs will move as a result of the deal, but no new jobs will be created.

Massachusetts has been historically a low-subsidy state, helped in large part by its highly trained workforce along with the Boston area's 55 universities and colleges, the latter factor noted prominently in GE's announcement of the move. Yet this is the largest subsidy package ever assembled in the state according to the Good Jobs First Megadeals database (download the December 2015 spreadsheet version here). In fact, the database shows that it is only the fourth package over $50 million in Massachusetts, and the very first above $100 million.

I asked Greg LeRoy, the founder and Executive Director of Good Jobs First, for his thoughts on the deal. His response:
GE’s press release is almost worth bronzing and mounting: the company clearly chose Boston because of its executive talent pool and research assets. Why on earth the state and city felt they had to throw $181,000 per job at the company is beyond me; that’s unconstrained federalism at its worst.        
 This dynamic is one I have discussed often: a company threatens to move to another state and suddenly you have an auction with numerous other states trying to pay a relocation subsidy, while the home is doomed to pay a retention subsidy as a best-case scenario. Frequently, as with GE, the company moves. Either way, collectively the states receive less tax revenue from the company which threatened to flee. Thus, the common question, "Was this a good deal for Massachusetts?" completely misses the point, which is that the country as a whole is worse off, due to the decreased tax revenue for no new jobs.

In this case, as I reported last summer, GE threatened to leave Connecticut over tax increases in the state budget. This is ironic/hypocritical/outrageous (take your pick) because, as the Hartford Courant (h/t Richard Florida) reported, General Electric pays only the minimum Connecticut corporate earnings tax of $250 per year. The Boston Globe (see first link in this post) reports that GE pays essentially no state corporate income tax in any state!

It's tiresome to report yet another egregious example of this kind of corporate blackmail. It is depressing to see Massachusetts, with only 4.7% unemployment in November 2015, give its largest subsidy package ever under such circumstances. It's past time for Congress to solve the job piracy problem once and for all.

Cross-posted at Angry Bear.

Friday, January 1, 2016

Ireland still isn't back

Ireland remains, in some circles, a poster child for austerity's success: It paid off its bailout loan early! It regained its 2007 Gross Nation Income per capita in 2014! Unemployment is only 8.9%! Don't believe the hype.

Paul Krugman recently pointed out that Ireland's employment performance continues to be dismal, especially in comparison with currency-devaluing, banker-prosecuting Iceland. Iceland's employment now exceeds its pre-crisis peak by about 2.5% whereas Ireland is still, 8 years later, 8% below its peak. More specifically, Irish employment peaked in Q1 2008 at 2,160,681; in Q3 of 2015, the figure was still only 1,983,000.

Not only that, but in 2014-2015 (May-April), Ireland continued with net emigration, as 11,600 more people left than came to Ireland. This was a substantial improvement of 9800 over the April 2014 figure, but still the trend is that Ireland is exporting unemployment literally.

Things are obviously getting better in Ireland for those who remain behind. Jobs are being created, and the number of unemployed has fallen. The April 2016 immigration report (the data are only reported once a year) may finally see an end to net emigration. But Ireland is 80% of the way to a lost decade, and isn't out of the woods yet.

Cross-posted at Angry Bear.