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By Greg Leroy
States and localities spend tens of billions of dollars annually in the name of creating jobs, but not all economic development deals are created equal. Some are clearly cost-effective and others are obviously taxpayer gifts to large companies.
A new report, Smart Skills and Mindless Megadeals, from Good Jobs First finds that workforce training programs provide taxpayers a solid return on their investments. But 20 or 30 times a year, states and localities award huge tax-break “megadeals” costing an average of more than $658,000 per job—compared with a few thousand dollars per job for most training programs.
The study draws heavily from Good Jobs First’s unique Subsidy Tracker database, which names 14 megadeals that each cost more than $2 million per job. By contrast, 25 of 33 workforce development programs cost less than $2,000 per job.
This is an important issue to highlight because most of these megadeals’ costs are in foregone taxes, and at that astronomical price, taxpayers can never break even. That is, the workers getting those jobs will never pay $658,000 more in taxes than public services they and their dependents will consume. Who makes up the difference? You guessed it: this is one cause of the long-term tax burden shift onto working families.
It’s the Corporate One Percent taking it to the bank, with companies like Boeing, Tesla and General Electric pitting states against each other for nine- and 10-figure subsidy packages. Highly automated facilities like data centers, oil and gas refineries, micro-chip fabrication plants and steel mills have the highest costs per job.
By contrast, studies find that most job-training programs pay off well. And even if the job for which the worker originally trained doesn’t pan out, chances are she will stay put and take her skills to another employer, so taxpayers’ investment still pays off.
Given these sharp differences in taxpayer costs and risks, Good Jobs First recommends that public officials should quit “buffalo hunting” for those big, risky megadeals and instead invest in skills, infrastructure, emerging business “clusters” and in local entrepreneurs.
It doesn’t have to be this way: at least 19 state programs and two long standing federal programs cap the amount of subsidy per job. And in the European Union, “aid intensity” rules reduce costs far below the levels of some U.S. deals.
The bottom line: states and localities should put their buffalo muskets in a museum where they belong. We can spend less and get more.