Reinvent Albany is often asked why subsidizing businesses with public funds is a bad investment of taxpayer dollars. Below is a short summary of facts and important independent scholarship that informs our point of view.
We will put this on our website and update it regularly. If you have suggestions, please contact Tom Speaker at tom [at] reinventalbany [dot] org.
What independent scholars know about taxpayer subsidies to businesses:
- Taxpayer subsidies to businesses influence where they choose to locate 2 to 25 percent of the time, according to Tim Bartik, an economist and leading scholar on economic development.
- About nine out of ten business hiring and investment decisions would be the same without subsidies, according to Alan Peters and Peter Fisher at the University of Iowa.
- Research since the 1950s has shown that tax incentives are poor economic policy, according to a report created by the experts contributing to Governor Andrew Cuomo’s 2012 Tax Reform and Fairness Commission (Peter Solomon and Marilyn Rubin).
- A 2020 evaluation of $30 billion in discretionary business subsidies across 50 states by Cailin Slattery (Columbia University) and Owen Zidar (Princeton) found that 30% of all firms opening offices in new locations with over 1,000 employees receive firm-specific subsidies while less than 0.2% of firms under 250 employees do.
- 80 to 96 percent of dollars from subsidies go to firms with over 100 employees (Good Jobs First).
- Experts on both the right and left have spoken out against business subsidies.
- Taxpayer subsidies to businesses are guaranteed to have a poor return on investment if they cost more than $5,000 per job per year.Business tax incentives typically cost $16,600 per job per year, according to Bartik.
- Subsidies do not rank high on companies’ list of reasons to select sites. According to one corporate survey, the most important factors for companies when choosing a location are:
- Availability of skilled labor
- Highway accessibility
- Energy availability and costs
- Quality of life
- Labor costs
New York gives roughly $10 billion a year in taxpayer funds to businesses:
- NYS spends roughly $4.4 billion a year on econ dev each year, and local govs spend $5.5 billion, according to CBC.
- New York’s public schools lose at least $377 million a year to corporate subsidies, and likely much more, according to Good Jobs First.
- NYS paid out $465m for the Film/TV tax credit in 2020.
Other NY subsidy news:
- Governor Hochul announced the creation of an Office of State Workforce Development, plus $350 million for workforce development in the state budget (Gotham Gazette). Our John Kaehny commented, “This is a far better way to spend state economic development dollars than outright subsidies to businesses because you’re getting a skilled workforce, which is fertile soil to get more businesses to come.”
- The Buffalo Bills are no longer the record holder for largest public subsidy for a stadium, as the Tennessee Titans announced a deal that could cost the public $1.2 billion (Investigative Post).
- The City Council is considering cutting the hotel occupancy tax,which currently generates $255 million a year for NYC (NY Post).
If you got this from a friend, sign up here. Subsidy Sheet is written by Tom Speaker, Policy Analyst at Reinvent Albany. Please send questions and tips to tom [at] reinventalbany [dot] org. We look forward to hearing from you!