Wittner: When corporate welfare fails to deliver
For several decades, state and local governments have been showering private businesses with tax breaks and direct subsidies based on the theory that this practice fosters economic development and, therefore, job growth. But does it? New York State’s experience indicates that, when it comes to producing jobs, corporate welfare programs are a bad investment.
This should be instructive to state and local officials across the U.S.
In May 2013, New York Gov. Andrew Cuomo, with enormous fanfare, launched a campaign to establish Tax-Free NY, a scheme providing tax-free status for 10 years to companies that moved onto or near the state’s public college and university campuses. Reluctant to oppose such a jobs creation measure, the New York legislature established the program, renamed Start-Up NY, that June.
Soon, some 356 tax-free zones were established at 62 New York colleges and universities, with numerous administrators hired to oversee the development of the new commercial programs on their campuses. New York State spent $47 million in 2014 — and might have spent as much as $150 million over the years — advertising Start-Up NY in all 50 states, with ads focused on the theme: “New York Open for Business.”
But how “transformative” has Start-Up NY been? According to the Empire State Development Corporation, the government entity that oversees more than 50 of the state’s economic development programs, during all of 2014 Start-Up NY generated a grand total of 76 jobs. Moreover, the vast majority of the 30 companies operating under the program had simply shifted their operations from one region of the state to another. The New York Times reported that, of the businesses up and running under Start-Up NY, just four came from out of state.
Of course, instead of shoveling billions of dollars into the coffers of private, profit-making companies, governments could invest their public resources in worthwhile ventures that generate large numbers of jobs — for example, public education.
What if the billions of dollars squandered on subsidizing private businesses in the forlorn hope that they will hire workers were spent, instead, on putting thousands of teachers back to work? Wouldn’t this policy also create a better educated workforce that would be more likely to secure employment?
It’s a shame that many state and local government officials have such a limited, business-oriented mentality that they cannot imagine an alternative to corporate welfare.
Lawrence S. Wittner is professor of History emeritus at SUNY/Albany and is syndicated by PeaceVoice.