Andrew Cuomo Reinvents the Enterprise Zone. Why?

Via @WNYPlanner, we learn that New York Governor Andrew Cuomo has proposed "Tax-Free New York," a plan that would let any business opening on State University of New York (SUNY) campuses outside New York City, some private colleges upstate, some areas adjacent to SUNY campuses, and an additional 20 "strategically located state properties" be entirely tax-free. According to the proposal:

Tax-Free NY will entice companies to bring their ventures to Upstate New York by offering new businesses the opportunity to operate completely tax-free – including no income tax for employees, no sales, property or business tax – while also partnering with the world-class higher education institutions in the SUNY system.

 In effect, we are looking at a new incarnation of the enterprise zone, though thankfully without regulatory incentives to go with the fiscal incentives. Unfortunately, enterprise zones don't work very well, so the lack of regulatory exemptions is cold comfort.

Another strike against this program is that it explicitly allows companies to use it if they relocate from other states. Of course, relocation from within the state is prohibited:

Protecting Against Fraud: Tax-Free NY will include a series of provisions to protect against fraud. Businesses will have to submit certification to ESD [Empire State Development], and falsifying certifications will be a crime. The initiative will include strict provisions to guard against "shirtchanging," or when a company reincorporates under a new name and claims its existing employees are now new jobs. The initiative will also include measures to prevent self-dealing and conflicts of interest. In cases of fraud, the state will be empowered to claw-back benefits granted to the business.

 Proving once again, as Good Jobs First reported in "The Job Creation Shell Game," that states already know how to write anti-piracy language. They just don't apply it to themselves.

Finally, as Citizens for Tax Justice points out, this program would exacerbate the state's fiscal problems: "With the state budget office projecting (PDF) shortfalls ranging up to $3 billion per year in the coming years, removing entire companies from the tax rolls is hardly fiscally responsible."

Hopefully the state legislature will reject this poorly thought-out proposal.

First-Ever Report on Local Subsidy Transparency Released

Today, Good Jobs First released the first-ever report (report, press release) on local subsidy transparency in the United States, "Show Us the Local Subsidies." This is a welcome development, even if the bottom line is that the glass is nowhere near half full yet.

The report analyzes 64 incentive programs in the country's 25 largest cities and 25 largest counties. Of these, only 1/3 (21) report the name of the subsidy recipient online. Of these, a mere 10 list the amount of the subsidy initially awarded, and only six the actual number of dollars ultimately disbursed.

Memphis/Shelby County, New York City, and Austin each had a program that earned a perfect score for their online disclosure, and Chicago was not far behind. But 20 cities and counties, out of the 36 that had locally-controlled subsidy programs, did not report at all.

Why is local transparency so important? The reason is simple: there are thousands of local governments giving subsidies, so it is difficult to obtain information on them all. Without information, there is no way to hold firms to any commitments they might make in return for the subsidies, nor any way to hold governments accountable for giving the subsidies. From the standpoint of a researcher, it means it is virtually impossible to make a particularly reliable estimate of how much they all add up to.

In fact, since local subsidy reporting is so bad, when I made my estimates of state and local subsidies in Competing for Capital and Investment Incentives and the Global Competition for Capital, I could not find a better approach than to simply assume that they were about equal to state subsidies, as several experts suggested to me. While one would think that most cities give less than states (though Kansas City has given several $100+ million tax increment financing subsidies), the fact that there are so many more cities than states offsets this consideration. In fact, in Missouri local subsidies exceed state subsidies, and they did so in California until the state abolished TIF last year. So this assumption is not as outlandish as it seems at first glance. The resulting estimate is that there is $25-35 billion in local subsidies annually, enough to hire every laid-off local worker in the country.

That's why a serious push for local level transparency is so welcome. When Greg LeRoy and Good Jobs First began promoting state disclosure in the late 1990s, the number of states with company-specific reporting was in the single digits. As the new report notes, even in 2007, only 23 states had reached some level of transparency. This year, we are up to 46 states and the District of Columbia. Good Jobs First is promising a new state transparency report card later this year.

Thus, while the glass is very far from half-full on local transparency, the fact that there is enough to report on, and that more is surely on the way, is very good news indeed.

"Libertarian" Koch Brothers Have Taken Tens of Millions in Subsidies UPDATED

The Cato Institute, originally the Charles Koch Foundation, is one of the most influential libertarian think tanks in the country. With both Charles and David Koch on its board of directors, Cato has produced numerous studies on the evils of corporate subsidies (which it calls "corporate welfare"), dating back at least to the 1990s. Supposedly, Charles Koch himself (via Wikipedia) is opposed to "corporate welfare," and plans to oppose it this year.

I guess I'll believe it when I see it. As previously discussed in Dirt Diggers Digest, Koch Industries has received many subsidies over the years, and I doubt this leopard will change its spots. In fact, the full tally of giveaways they have received extends far beyond the article linked above.

The calculation below relies on Good Jobs First's Subsidy Tracker database and the New York Times subsidy award database (not the program database). While 98% of the entries in the Times database come from Good Jobs First, reporter Louise Story took the first big step toward aggregating by standardizing company names. However, this still does not connect parent and subsidiary companies, so I carried out this step for the Kochs by using the Wikipedia entry for Koch Industries. With a quarter of a million entries and counting in Subsidy Tracker, I cannot imagine how long this would take if I had to do it for every company.

Here are the subsidies I was able to identify for Koch companies.

Flagship Koch Industries has taken over $16.5 million in subsidies from 11 different awards, none of which are sales tax breaks (which generally are not subsidies).

Subsidiary Georgia Pacific has received 72 subsidies worth over $43.9 million (none of these were sales tax breaks).

Subsidiary Flint Hills Resources LP has received subsidies from Iowa, Kansas, Texas, and Michigan, according to the Good Jobs First Subsidy Tracker; the New York Times subsidy database, which omits Michigan but includes one more Iowa subsidy, puts the value of the Iowa and Kansas subsidies alone at just over $12.5 million (again, none of which were sales tax breaks).

Subsidiary INVISTA has received $217,504 in training grants from South Carolina, according to Subsidy Tracker. Several other subsidies appear to be connected to this subsidiary, but none have available subsidy amounts. Again, none were sales tax breaks.

To summarize:

Koch Industries: $16.5 million
Georgia Pacific: $43.9 million
Flint Hills: $12.5 million
INVISTA: $0.2 million

Total subsidies to the Koch brothers:$73.1 million

Remember, this is the minimum value of the Koch brothers' subsidies. Some of the entries had no dollar figures available, and there is always the possibility that some incentives were missed entirely or that the awards above were only a part of a subsidy package, not the entire value. In particular, local subsidies are not well covered in either database; the same is true for my national estimates. The  data just isn't widely available.

Meanwhile, Koch Industries is going to be the largest investor in the Big River Steel project in Osceola, Arkansas, which is expected to cost the state $132 million in incentives.

Like I said, when it comes to the Kochs fighting subsidies, I'll believe it when I see it.

UPDATE: Yasha Levine tweeted me to let me know about two stories he did at Exiled Online in 2010 and 2011. While I focus above on state and local subsidies, Levine's stories focus on federal and foreign subsidies received by Koch companies. The biggest takeaway is that the federal subsidies, especially the ethanol subsidy, dwarf what the Kochs have received at the state and local level, with the ethanol subsidy alone worth perhaps $1 billion a year. The mind boggles.

Check out Levine's stories for the gory details. Thanks, Yasha!

Cross-posted at Angry Bear.