I heard a report on the radio this morning about the myriad of "incentives" that divert various tax payments to corporations.
The news piece happened to focus on companies who get interest free "loans" and then divert employee income tax withholdings to pay back the "loans" without the knowledge or consent of anyone except some economic development guy in OKC (State gives money to company, company pays state back with tax revenue its employees are legally required to pay to the state anyway).
But it started me thinking about what all incentives are out there, how we got into this arms race, and where Oklahoma stands.
Now, that's an economic'c thesis. SO I narrowed my focus a good bit. But first I wondered into a few specific beneficiaries that made me laugh. Holly Corp got $1.6mil in manufacturing development incentives for, presumably, adding to their refinery in Tulsa as opposed to adding to their non-existent refinery in Arkansas. In 2013 (last year I could find data) the ownership group of the Thunder received $3,600,000, to help offset the cost of billionaires employing millionaires to bounce an orange ball. And of course Macy's will be getting a TIF worth $8.75mil, a state Manufacturers Tax Exemption worth $8.5mil, $1.5mil from the governors slush fund, $500k in infrastructure from ODOT, matched by about $500k from Tulsa County, a .85% sales tax exemption ($400k), $500k from Owasso, and a 5% payroll rebate for a decade for whatever qualifies for quality jobs. What are we getting for ~$30mil in handouts?
- Somewhere between 1500 and 5000 jobs, depending on the press release. The vast, vast, VAST majority will be part time warehouse associates and seasonal workers.
- A commitment to hire 367 full times employees
- According to
Glassdoor.com, the average seasonal worker at a Macy's Warehouse makes $10.50 an hour. The average Warehouse Associate makes $12.00 an hour.
Here is an 87 page manual for the State level kick backs (doesn't county City, County, or Tribal):
It very well may be that by paying Macy's millions to move here, we will attract thousands of employees who are then eligible for benefit programs from the State of Oklahoma. That seems like a potentially bad investment. So why do we do it?
Well, we are told we do it because everyone else does it. TEXAS DOES IT! SO WE HAVE TO TOO! And yes, Texas does do it. They do it more in overall dollar terms than anyone else.
Texas gives out $19 Billion a year in incentives. They attract many jobs by doing so. Unfortunately, they have also created more minimum wage jobs than anywhere else and have sunk to #3 in the nation for low paying jobs and #11 on citizens living below poverty. It has also left the state broke, so they cut education in order to continue the handouts.
Tax incentives are a zero sum game. They do not "create" any jobs. They merely move them around. Whirlpool to Tulsa. Citgo to Houston. Etc. The net result is tax money gathered from citizens and given to various companies. Wealth transfer from the less affluent, to the more affluent. The entire process should be wound down like the nuclear standoff of the cold war. But until that happens, how does Oklahoma stack up?
Using 2012 numbers, which are the most reliable I could find for all three criteria:
- The United States of America saw $80 BILLION in taxpayer money filtered to companies per year. That accounts for 0.47% of national GDP.
- Texas paid out $19 Bil in economic incentives. Accounting for 1.3% of economic activity in the state of Texas. This represents nearly 18% of government "spending" (foregoing revenue is the same as spending money).
- Oklahoma handed $2.19 Bil over to companies. Accounting for 1.1% of all economic activity in the state of Oklahoma. Representing 31% of all government "spending." (in a budget of $7BIL)https://stateimpact.npr.org/oklahoma/2012/12/03/oklahoma-governments-pay-2-19-billion-a-year-to-incentivize-private-companies/https://bivisual.cpa.texas.gov/QvAJAXZfc/OpenDocNoToolbar.htm?document=Documents%2FTR_Master_UI.qvw&host=QVS%40daupswap80&anonymous=true&select=LB00,03&sheet=SH27Now, I'm happy to have someone post better numbers. There are all kinds of numbers all over the place for various fiscal years etc. But the fact is the pace is accelerating and, as these are long term programs, the costs are exponential. There is no data to tell us if we are getting a return on our investment (ignoring the zero sum game). Corporate subsidies are now a bigger industry in
Oklahoma than hunting, fishing, forestry and agriculture combined. While it is tiny compared to our largest industry (government, accounting for nearly 19% of GDP), handouts are still a huge part of our economy.
Why is our "small government" and "no welfare" leadership in Oklahoma City just going along for the ride? Free market economy? Why is there not a multi-state compact trying to stop this crap from continuing? There is $80bil in tax revenue being transferred around by the government each year, as our infrastructure collapses and our educational system falls behind.
How many Oklahoma's realize that they $565 per year for each member of their family so Devon can make another billion next quarter?
/rant
