In light of Amazon announcing its two new headquarters on the East Coast, along with the incredible tax incentives provided by Virginia and New York, we’d like to repost a blog from last year about corporate giveaways.
In many states, the amount given away in subsidies and tax breaks to big corporations exceeds the amount needed to fund public pensions each year. That is the conclusion of a report from Good Jobs First, a nonpartisan economic development watchdog group. When states make harmful cuts to public pensions, legislators often say the cost of public pensions is too high. The reality is that pensions are the most cost-effective retirement plan for working families and states are losing billions of dollars each year in corporate giveaways.
Last year, Good Jobs First released a version of this report focused on Kentucky. In Kentucky they found that the state gives away over $580 million a year in corporate subsidies and tax breaks. According to the Kentucky Office of the State Budget Director, the state loses more money in tax expenditures each year than it collects in tax revenue. Meanwhile, the annual cost of funding public pensions in Kentucky represents only 69 percent of the money given away to corporations.
It’s a similar story in other states. In Oklahoma, annual pension costs are only a third of the annual cost of corporate giveaways due to the massive tax breaks given to the oil & gas industry in the state. From the report: “If Oklahoma cut the subsidies and tax breaks identified here, they could pay the annual normal cost of state pensions each year, and use the balance to pay off all unfunded liabilities in state pension funds in less than 15 years.”
In Texas, the annual cost of public pensions is actually greater than the amount given away through corporate subsidies and tax breaks. However, it is important to note that Texas does not have a corporate income tax, meaning they are already leaving money on the table every year without any expensive tax expenditures. Furthermore, the state does not disclose the cost of some tax subsidies, making it difficult to know exactly how much state revenue is lost each year.
In Colorado, the cost of funding public pensions continues to be hotly debated. Despite the loud anti-pension rhetoric of some politicians, the annual cost of funding pensions in Colorado is less than half of what the state gives away each year through corporate subsidies and tax loopholes. As in Oklahoma and Texas, Colorado gives away substantial amounts of money to the oil & gas industry each year. And, as in other states, Colorado does not disclose the costs of all of its subsidies and tax expenditures, making an accurate accounting difficult.
What these reports show is that state legislators are often presented with a false choice between fully funding public pensions and paying for other essential state services. When billions of dollars are lost each year through corporate subsidies and tax loopholes, this represents a significant cost to the state. Often these costs are significantly higher than the cost of meeting the state’s commitment to fully fund its public pensions. Legislators should closely examine all of the state’s annual expenses and not buy into a false narrative regarding funding pensions.
You can read the national report from Good Jobs First here as well as the state profiles for selected states.