Officials defend secrecy on business subsidies

Original Reporting | ByMike Alberti | Corporate influence, Open government

Oct. 10, 2012 — This past January, Brian Cronin, Democratic caucus chair in the Republican-controlled Idaho state legislature, introduced the Idaho Corporate Tax Incentive Accountability Act, which would have required every company hereafter receiving tax incentives worth at least $40,000 in a year to report the total value of the incentives for that year, along with detailed information about the number and quality of jobs created by the company.

NONE OF OUR BUSINESS?

This is the third in a series of articles examining the widespread phenomenon of states and localities providing incentives — that is, subsidizing — to private businesses in the United States. The first article, available here, examined the economic impacts of these incentives.

The second article, available here, described the staggering lack of transparency associated with business subsidies. In this article, we scrutinize the justifications given by state and local politicians who favor incentives but who defend keeping them secret.

Editor

Idaho, which gives hundreds of millions of dollars a year to businesses through a variety of economic development incentive programs, is among the states with the fewest and least restrictive transparency requirements. For example, according to the advocacy group Good Jobs First, which tracks publicly available data on state subsidies, Idaho spent more than $130 million last year on a sales tax exemption for manufacturers, miners, and farmers — a sum representing nearly 5 percent of the state’s entire budget — but did not disclose any information on the recipients.

“We want to ensure that every dollar we spend on economic development and job creation truly puts people back to work, and that taxpayers are getting a good return on their economic development investment,” Cronin said in support of his accountability bill.

But when the bill arrived in the House Committee on Revenue and Taxation, which is chaired by Republican State Representative Dennis M. Lake, it did not even receive a hearing.

“I didn’t think it needed one,” Lake said in a recent interview. “Corporations have a right to privacy, and it’s really nobody’s business whether they are getting tax incentives or not.”

 

A right to privacy?

Lake was making one of two basic arguments that came up repeatedly in interviews with more than a dozen officials in several states and localities who were supportive of incentives and have resisted transparency. Several lawmakers, like Lake, insisted that disclosing information about private companies, particularly tax-related information, would violate that company’s assumed right to privacy. The second argument, sometimes made in tandem with the first, was that revealing such information could undermine the competitiveness of the companies receiving incentives by giving their competitors access to hither-to unknown facts about their business practices.

Remapping Debate asked Kansas state representative Anthony Brown, a Republican and chair of the House Commerce and Economic Development Committee, how it was possible for Kansans to make informed decisions about the state’s tax and spending policy without having access to information on where their tax dollars are going.

“Most of the people in my district don’t vote. They don’t even know who their elected representative is, and you expect them to make informed decisions about tax incentive policy?” — Idaho State Rep. Dennis M. Lake

“What you’re asking for is confidential information about companies’ taxes,” Brown said. “One thing we always have to consider is the balance between the public’s right to information and the business-owners’ right to run their business how they want.”

When asked the same question, Lake was more direct: “That’s what they elected us for,” he said. “That’s the beauty of a representative democracy: people elect us to make those decisions for them.”

And how can they make informed decisions about who to elect if they are not able judge the policies their representatives have supported and put in place?

“I hate to be cynical, but you have a lot more faith in John Q. Public than I do,” he said. “Most of the people in my district don’t vote. They don’t even know who their elected representative is, and you expect them to make informed decisions about tax incentive policy?”

 

Bad for business?

The second argument — that requiring disclosure of information on incentives hurts the competitiveness of the businesses receiving them — was put forward by Alabama State Representative Barry Mask, a Republican who chairs the House Economic Development and Tourism Committee. Mask has introduced numerous bills over his tenure creating new incentives or expanding existing programs. “If you look around our state, you see how successful we have been,” Mask said.

Alabama now relies on incentives more than nearly any other state, but does not disclose the names of the recipients of the vast majority of its programs, except in special circumstances. “Anybody can walk into the Commerce Department and look that information up,” Mask said, “but you just can’t copy it, transcribe it, photograph it, or take it with you.”

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