The New York Times is running part two of its series on state and local corporate welfare. Today’s piece focuses on Texas, the biggest grantor of such subsidies, and a state at the forefront of both radical cuts to education spending and aggressive state tax cuts that have left both the state and local budgets in real crisis.
The free flow of tax breaks and subsidies in Texas makes it particularly fertile ground to examine these economic development deals and the fundamental trade-off behind them: the more states give to businesses, the less they have available in the short term to spend on basic services, a calculation made more stark by the recession.
To help balance its budget last year, Texas cut public education spending by $5.4 billion — a significant decrease considering that it already ranked 11th from the bottom among all states in per-pupil financing, according to recent data from the Census Bureau. Yet highly profitable companies like Dow Chemical and Texas Instruments continue to enjoy hefty discounts on their school tax bills through one of the state’s economic development programs.
Today’s article also describes the role of private consultants, who seek subsidies for companies and convince local government officials that companies won’t locate in their districts without such subsidies. Many of these same companies are simultaneously at work aggressively blaming public employees and social spending for budget deficits, deficits often created by the kind of bad deals described in this series.
Nationwide, a whole industry of consultants has grown up around state efforts to lure companies with incentives. Companies like Ernst & Young, Deloitte and Automatic Data Processing, a payroll company, have divisions dedicated to helping companies search for the best deals.
These companies often get a cut of the deals that are made, and also have political relationships with the state treasurers who must approve them.
The article hits on all of the key themes: the complicated role of local governments (including school boards) in approving abatements that they believe will be supplemented by state money, which doesn’t fully materialize. The lack of scrutiny of specific deals when they’re approved, the zero sum game for the state and national economy, the companies’ view that they must maximize tax breaks or risk shareholder revolt.
And through it all, the unstated assumption that companies deserve tax breaks for making business decisions, and that they won’t make those decisions without the tax breaks. It reflects the idea that taxes serve no purpose except to penalize the private sector; sadly, there are only one or two actors in the series who seem to recognize that the tax benefits they receive would otherwise have been spent on the schools their own workers send their children to.
In a time of economic recession, growing poverty, and booming population, Texas chose an economic development strategy that cut $5.4 billion from its state education budget, on top of the hundreds of millions of dollars lost by local school districts. It would be great to see more articles that highlight those kind of choices, instead of blaming everything on lousy economic data or public workers.