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.
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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.
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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!