Texas: home to big hats and bigger business incentives (Photo: Flickr, Ken Lund)
A 10 month investigation by the New York Times has revealed billions of dollars in state government incentives given to big businesses throughout the United States.
The series, by investigative reporter Louise Story, ran over several days under the title ‘The United States of Subsidies’.
The investigation dissects the ‘incentives game’ that pits state against state in a battle to win business by offering tax exemptions, refunds and other subsidies. The New York Times revealed that such incentives amount to nearly £50bn each year.
The three-part series totals almost 15,000 words and incorporates a handful of short films and a searchable state-by-state database of the 1,874 programmes, most of which are directed at large businesses. General Motors emerges as the biggest beneficiary, receiving over £1bn since 2007 from 208 grants collected over 16 States. The New York Times company itself has also received incentives – up to £14m from New York City and New York State.
While the incentives do create beneficiaries, as Story acknowledges, ‘The question is moreso if local governments are paying more than [they] need to pay for those jobs and whether the competition between states drives up the cost of luring jobs.’
Related article: MPs slate HMRC and big business for ‘outrageous’ tax avoidance
Out of the almost 2,000 incentivised programmes identified, the NYT highlights examples of ‘the incentives game’ at its most shocking: a financially-crippled town in Michigan that wooed Hollywood blockbusters with tax breaks only to be left with empty stages and a castle built with £5.5m of wood; and a border war between Kansas and Missouri over a famous steak rib restaurant.
It is ‘an economic border war,’ says one observer of the Kansas incentives battle. ‘State incentives are being used to lure businesses back and forth across the State lines’. In another example, Kansas provided £22m to an entertainment operator to move across the border from Missouri and weeks later cut its education budget.
‘I think that’s going to be on the backs of our kids,’ says one Kansas local.
Texas emerges as the most generous state, handing out an estimated £11bn each year for programmes in manufacturing, agriculture and healthcare. And while the lone star state boasts of its record of strong job creation made possible partly through incentives and its ‘open for business’ policies, the NYT investigation asks whether profitable companies such as Dow Chemicals should benefit from tax breaks at a time when education spending was cut by £3.3bn.
As corporate giants in the UK such as Starbucks, Google and Amazon came under fire this week for ‘failing to meet the legitimate public expectations from the tax system’, the NYT finds that Amazon has received £215m from 22 grants in nine states. Amazon’s incentives have created thousands of jobs, the NYT reports, but have allowed the company to ‘negotiate delays in online sales tax collection.’ Google, for its part, has recevied £66m from 10 grants in six states.
Explore the full investigation here.
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