This week, the Wall Street Journal reported on an interesting portion of President Obama’s proposed 2016 budget: the barring of tax-exempt bonds in the financing of professional sports facilities. The Treasury Department believes the trend toward this practice has “shifted more of the costs and risks from the private owners to local residents and taxpayers in general.”
These costs and risks have been all too familiar to Georgians over the past two years — the promise of economic development prompted quick (some would argue hasty) action committing a massive amount of public money to both the Braves and Falcons projects.
Stadiums are just one of the many examples of public give-aways to subsidize private buisness that are sold to the legislature and the public as economic development and job growth projects in which the costs to the public far exceed the public benefits. Georgia is among a majority of states that does not perform any real analysis before granting these exemptions or subsidies for business development or other purposes.
Georgia apparently also does not follow up to determine whether a business such as the Caterpillar or Kia plants actually deliver on their promises to employ X numbers of people at certain wages or salaries, or otherwise deliver on their promised economic benefits.
For example, the state grants tens of millions of dollars annually in tax credits to the movie industry (and maybe other exemptions from sales or other taxes that we don’t know about). The effect of these and other tax exemptions and credits is to shift the burden of taxation to finance state operations to other taxpayers and revenue sources.
The citizens of Georgia are asked to take it on faith that these tax credits to the movie industry are economically justified—but the catch is that no one really knows whether that is true or not—much less the extent of the public benefit in excess of the cost to the public of those tax credits.
The General Assembly made no study before enacting the tax credits and has no economic data to show whether the public benefits from the expenditures by the movie industry in Georgia are sufficient to outweigh the cost of the lost revenue from these tax credits.
Common sense as well as sound fiscal policy would require that the state perform a competent and thorough cost-benefit analysis before granting tax exemptions, tax credits or subsidies either to lure new business to Georgia or retain or expand existing businesses. The state should be prohibited from giving away public funds (because that is precisely what grants, exemptions and subsides are) on faith or based on a show of hands without clear and convincing evidence that the public at large (and not a select few) will derive tangible benefits that are at least equal to or exceed the cost of the foregone tax revenues.
The state should also be required by law to follow up and enforce the promises made by promoters and developers to create new jobs in Georgia for Georgia residents (and not residents living in Alabama, as is true of many of the workers at the Kia plant).
Our elected officials are supposed to be trustees and fiduciaries of the people, yet consistently expose them to increasing amounts of risk in the name of economic development year after year.