On December 19 I wrote an article about the waste of money we know as "economic development". Citing research showing that it is practically impossible to identify any positive returns on "economic development" - better known as corporate welfare - I noted:
Perhaps it is time for a study of the exact circumstances of corporate-welfare deals here in Wyoming. Even more important: it might be time to ask for the highest level of transparency and public scrutiny of any "economic development" deal with any business, from hereon. For example, now that more and more communities around the state are lining up behind WyoFlot - the state-run airline project that came out of ENDOW - we taxpayers should demand to see the details of any deal made with any airline.
In another piece of good research, the Kansas Policy Institute (KPI) has demonstrated that economic development is a complete waste of money. Using Spirit AeroSystems as an example, the KPI shows how a highly profitable company, with surging demand from the world's two largest producers of commercial airplanes, has been showered with taxpayer money. The tax credits are paid out despite the fact that Spirit AeroSystems can pay their 1,400 new employees in Wichita an average of $54,000 per year. Concludes the KPI:
taxpayer handouts to corporations is a zero-sum game and a form of cronyism. Only the business with the best government connections benefits, and it’s at the expense of taxpayers.
In an article on Monday, December 31 (p. A3 print edition) the Wall Street Journal examines yet another example of corporate welfare:
For a poor state struggling to diversify its economy, a rush of Hollywood productions drawn to New Mexico's rugged landscape and frontier vistas has been a boon. But state economists and lawmakers worry the tax-credit program attracting dozens of production here ... is unsustainable. ... The surge in production has spawned a rebate backlog that has left he state owing $180 million to the film and TV industry at the end of fiscal year 2017 ... The debt is projects to rise fo $250 million by the end of the current fiscal year in June and could reach $700 million by the end of the fiscal year 2023 if production trends continue
Wait a minute. I thought economic development - whether tax credits, cash handouts or other perks - would generate enough tax revenue to pay for itself.
The Wall Street Journal continues:
A cap on credits, passed by lawmakers in 2011 and supported by departing Gov. Susana Martinez, a Republican, limited the state to doling out $50 million a year in rebated. However, it doesn't limit the amount of funds filmmakers are eligible to receive. Thanks to the recent production boom, that has meant the state owes far more in any given year than it can pay, causing debt to accumulate.
The combination of a capped tax credit and unlimited claims by individual companies has had a hilarious, probably (though this was concocted by politicians, so you never know) unintended consequence:
a film company claiming a credit in 2023 would have to wait up to 14 years to get reimbursed under the projected backlog.
New Mexico's newly elected Democrat governor, Michelle Grisham, wants to eliminate the tax-credit cap. Since these credits apparently do not pay for themselves, and since the state has a fat backlog of credits to pay out, this will drain the state budget of hundreds of millions of dollars in the next couple of years.
It is worth noting that thanks to Medicaid Expansion, New Mexico is about to become the first state in the country where more residents are enrolled in Medicaid than in private insurance plans. With the costs of this program skyrocketing, New Mexico is bound for major budget problems that will include its frantic commitment to economic development.
While it is sad in itself to see a state commit fiscal harakiri, the Enchantment State's fiscal suicide is best viewed from the outside as a deterring example for us here in Wyoming. Not only should we stay away from expanding the cost of our already over-bloated government, but we should also make a serious effort to scale back, and eventually eliminate, the destructive practice of corporate welfare. Even those who insist on calling it "economic development" will eventually have to acknowledge that it is a big, fat, net cost to taxpayers.