1 Corporate Welfare vs. Pension Obligations Greg LeRoy ~ Good Jobs First National Conference on Public Employee Retirement Systems Public Pension Funding Forum September 11, 2017 ~ San Francisco Good Jobs First: Since 1998, a Fiscal-Policy Resource for Journalists, Policymakers, Grassroots Independent, non-partisan, non-profit Model Research and Publications 50-state “report card” studies Subsidy Tracker & Violation Tracker Testimony, Training and Speaking
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Corporate Welfarevs. Pension Obligations
Greg LeRoy ~ Good Jobs First
National Conference on Public Employee Retirement Systems
Public Pension Funding ForumSeptember 11, 2017 ~ San Francisco
Good Jobs First:Since 1998, a Fiscal-Policy Resource forJournalists, Policymakers, Grassroots
Independent, non-partisan, non-profit Model Research and Publications 50-state “report card” studies Subsidy Tracker & Violation Tracker Testimony, Training and Speaking
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>$70 Billion per Year! Property Tax Abatements Tax Increment Financing (TIF) Districts Corporate Income Tax Credits Personal Income Tax Diversions Sales Tax Exemptions & Diversions Tax-free Loans Enterprise Zones Training Grants Dedicated Infrastructure
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Paying Taxes to the Boss
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Memphis Budget Erosion
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TIF vs. Chicago Schools
Detroit MSA Shutdowns 2001-04
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MEGA Deals 2001-2004
Intergovernmental Free Lunch
School boards usually powerless against abatements, TIFs, EZs
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$1.2B and Counting
And Right Behind at $1.1 Billion…
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Born in the South, Now Eating Budgets Everywhere Boeing $8.7B Washington State Tesla $1.3B + Faraday $334M/Nevada Intel $2 billion/Oregon General Electric $145M/Massachusetts Foxconn $3 billion/Wisconsin Cerner Corp $1.6 billion/Missouri Sempra Energy $2.2 billion/Louisiana 9 and Counting/New Jersey
363 Megadeals
$658,000/job
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Corporate Welfare vs. Pensions New 15-State Analysis (for NPPC) of Giveaways +
Loopholes vs. Annual Employer Normal Costs
Subsidies = $22.2B
Obligations = $14.9B
In 11/15 states, giveaways exceed obligations
Giveaway/Pension Ratios Louisiana ~4:1 Florida & Oklahoma ~3:1 Michigan, Colorado, Arizona & Calif. ~2:1 North Carolina 4:3 Missouri & Montana >1:1 Kentucky ~1:1 Alabama, Oregon & Texas ~2:3
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Data Centers: How Costly? 10 states with specific “cloud” tax breaks
fail to disclose even aggregate cost!
Alabama, Indiana, Iowa, Mississippi, Missouri, Nebraska, Oklahoma, South Carolina, Tennessee, & Virginia
Fairfax County, Va.: 43 data centers, exempted
Megadeals Gone Awry
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Controversial Deals Awry
Perverse Priorities
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But What’s the Total Cost?
~$70 Billion per Year = Old Estimate, Based Mostly on
Extrapolations
Enter GASB!(Governmental Accounting Standards Board)
Project of obscure Financial Accounting Foundation @FAFNorwalk www.gasb.org
Birthed in 1984 by 10 public-official associations and AICPA
Creates Generally Accepted Accounting Principles (GAAP) for state & local govts
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GASB 101, cont. Best known for Statements 34 (infrastructure
depreciation) and 74 & 75 (Other Postemployment Benefits, “OPEB”)
Force of law, federal audit requirement, and of credit ratings
But… MIA on tax expenditures…
Tectonic News Oct 2014! First-ever draft standard on economic development “tax
abatements”
Many non-profit, tax & budget, academic, labor groups and public officials comment
~300 comments, 120 substantive, >2/3rds pro-disclosure
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August 2015:Statement No. 77 Issued Covers GAAP-compliant budgets calendar
2016 and beyond
~50,000 state & local government bodies will newly report
CAFR Note: how much revenue was lost to each tax abatement program
“Tax Abatement” 3 Elements1) Agreement between government and taxpayer
(not broad exemption)
2) Government agrees to less revenue
3) Taxpayer agrees to perform quid pro quo
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Data Will be Crude For abating governments, one dollar figure per program
per year
For passive income losers (e.g., school districts), one dollar figure per tax, per source
Missing: # of deals, names of recipients, future-year losses
But Data Will be BroadGASB study finds GAAP usage by:
~80% of counties
~71% of school districts
~76% of cities and towns
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Intergovernmental Disclosures
Bernalillo County, $210
City of Albuquerque,
$280
Albuquerque Public Schools,
$250
UNM Hospital, $150
CNM (community
college), $80
State of New Mexico, $30
Hypothetical $1,000 Bernalillo County property tax abatement
Associated Obligations
Example: new infrastructure promised to abated project
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51 State “Roadmaps” AvailableWho collects CAFRs?
Are CAFRs posted online?
Are CAFRs stress-tested?
Who else commented pro or con?
When do first big cities, counties, school districts report?
A Cottage Industry is Born!
Journalists
Activists
Academics
State Agencies
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ContactsScott Klinger
[email protected] x 212
Greg [email protected]
202-232-1616 x 211
End of talk; slides that follow may assist depending on content of Q & A
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Subsidy Tracker
Company-specific and searchable 50 states + DC + localities
+ federal deals
Subsid-iaries tied to >3,300 global corporate parents
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Passive-Revenue Losses
School districts: likely revealed as biggest losers
“Budget Icebergs” Revealed
No local government has issued a Tax Expenditure Budget Boeing in Charleston County
States’ are irregular No data-center cost disclosure in AL,
IN, IA, MS, MO, NE, OK, SC, TN or VA
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Compliance Debate?Tax Increment Financing – one GASB ruling already
Constitutional gift-clause excuse?
“Performance-based incentives”
Other tax diversions (income, sales)
Inequality Mash-UpsDo “the poor pay more”?
Do communities of color pay more?
Metrics: free and reduced school lunches, school test scores, race, income, poverty, tax-base wealth
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Opportunity Costs (Besides Pensions)
What works, but has declining support? Education & Training Infrastructure Small Business/Entrepreneurial Aid “Cluster” Strategies Technology Diffusion
Trump EffectCould GASB-revealed $$ offset losses to:
Manufacturing Extension Partnership
Economic Development Administration
Workforce Opportunity and Innovation Act
HUD Block Grants, etc….
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Left-Right KumbayaAmericans for Prosperity, Libertarian
think tanks oppose “crony capitalism”
Liberal budget groups oppose loose, costly corporate giveaways
8/21/2017
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Of the Largest 150 Corporations by payroll in Louisiana only 51 paid any tax at all. There were 99 of those same 150 companies that paid zero tax.
Is Big Business Paying a Fair Share?
In 2010, 2230 companies doing business in Louisiana made more than $815 billion in Federal Taxable income and did not pay one cent in Louisiana corporate income tax.
Those companies made $8.4 billion in Louisiana income. If that income was taxed at 6% it would produce almost $500 million in additional revenue.
In 2010, of the 109,970 corporations in Louisiana, 91,693, or 83% paid no corporate income tax.
8/21/2017
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Is Big Business Paying a Fair Share?
In 2013, 2855 companies doing business in Alabama made more than $583 billion in Federal Taxable income and did not pay one cent in Alabama corporate income tax.If those companies had made just 1% of that income in Alabama or $5.83 billion, and that income was taxed at 6.5% it would produce almost $379 million in additional revenue.In 2013, of the 59,404 corporations in Alabama, 23,925, or 67% paid no corporate income tax.
Corporations paying no state tax
• Dupont– no tax to any state 2008‐10
• Wells Fargo– no tax to any state in 2009
• Intel—no tax to any state 2008 and 2009
• Boeing –no tax to any state in 2010
• Comcast—no tax to any state in 2009
• GE—no tax to any state in 2010
• American Express—no tax to any state in 2008
• Southwest Air—no tax to any state in 2009
8/21/2017
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The Add‐Back Gimmick: Shifting Louisiana Income To No‐Tax States
Louisiana Corporation
West Coast Parent
Delaware PICCompany
Payment for trademark (deducted as expense)PIC makesDividend paymentTo West Coast Parent
Parent makesDividend paymentTo LouisianaCompany. DividendIs tax free.
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