So, think you could count how many times you’ve heard the following or something similar during this election campaign season? “We have to create a more business-friendly climate in Vermont – taxing industries creates a negative image.” Perhaps we’ll hear that even more often after the election as the state tries to charm promises from Global Foundries, the soon-to-be new owners of IBM’s Essex manufacturing plant.
Recently when speaking about giving a particular business a tax break Lt. Gov. Phil Scott said “It doesn’t cost us much.” But how do we know that? Government giveaways – tax abatements, cash grants, loan or loan guarantees – are difficult to document and often not thoroughly tracked. Well that may be about to change.
New accounting rules, changes that are called “huge” are being proposed by the Governmental Accounting Standards Board (GASB). The changes would require that states and local governments report corporate tax incentives as lost income.
"If you care about school finance or smart growth or regionalism or land use in general, this data will enable you to figure things out that were unthinkable before.” Says Greg LeRoy, executive director of Good Jobs First.
The proposed tax abatement disclosure requirements would include:
The tax being abated
Criteria that must be met for the taxpayer to be eligible for the abatement
Provisions for recapturing abated taxes
The types of commitments made by tax abatement recipients
Number of tax abatement agreements
Dollar amount of taxes abated
Other commitments made by a government, such as to build infrastructure assets.
Also of note is the provision requiring governments to report the criteria that businesses must meet for the abatement and how governments will get that money back if the goals aren't achieved, commonly referred to as clawback provisions.
A New York Times study in 2012 showed combined federal and state government incentives to corporations give up $170 billion per year. By state, Vermont’s giveaways weren’t at the top but the study showed the state has (as the saying goes) skin in the corporate incentive game.
The Vermont giveaways to businesses come from somewhere (check your wallet), and collectively they can take a bite out of stressed state and local budgets. Tax incentives for corporations versus money for schools or services – the GASB accounting changes could make the choice that clear.
And since the VTGOP is campaigning on affordability let’s just see how affordable all those corporate tax breaks are for the rest of us. So, when you start adding it up as lost revenue, it may become increasing hard to believe as Lt. Gov. Scott claims that “It doesn’t cost us much,”