19 Billion Reasons To Talk About Texas Business Incentives

There are 19 billion reasons why the talk of Texas for the past two days has been a lengthy front-page New York Times investigation by Louise Story, part of a series on how state and local economies are changed by tax incentives. 

As in $19 billion: the annual haul in tax breaks Governor Rick Perry and Texas give out to help lure businesses around the state. As Story wrote:

Under Mr. Perry, Texas gives out more of the incentives than any other state, around $19 billion a year, an examination by The New York Times has found. Texas justifies its largess by pointing out that it is home to half of all the private sector jobs created over the last decade nationwide….

Yet the raw numbers mask a more complicated reality behind the flood of incentives, the examination shows, and raise questions about who benefits more, the businesses or the people of Texas.

Along with the huge job growth, the state has the third-highest proportion of hourly jobs paying at or below minimum wage. And despite its low level of unemployment, Texas has the 11th-highest poverty rate among states….

The free flow of tax breaks and subsidies in Texas makes it particularly fertile ground to examine these economic development deals and the fundamental trade-off behind them: the more states give to businesses, the less they have available in the short term to spend on basic services, a calculation made more stark by the recession.

The piece is accompanied by an exhaustive database (for all 50 states) that itemizes each and every one of the 2,649 grants Texas and its local governments have issued. The analysis (by Story, Tiff Fehr and Derek Watkins) notes that $19 billion represents 51 cents per dollar of the state budget, and $759 per person. 

Story wrote that Governor Perry “acknowledged that the state’s job growth was not erasing persistent poverty, saying that “we are going to have people that fall through the cracks.” He said creating jobs was the best way to help Texans, who “don’t want government assistance when they can do it themselves.”

Story discussed her story–that construction couldn’t be avoided forever!–on MSNBC’s Morning Joe Monday. 

By early Tuesday, the piece had amassed more than 600 comments, as well as numerous reactions from around the net. 

The “most searing report ever on how much ‘doin’ bidness’ is costing us,” progressive Perry Dorrell at Brains and Eggs opined.

At the New Republic, Alex MacGillis noted that he covered some of this same territory in a 2011 profile of Rick Perry:

But even I was shocked at some of what Times reporter Louise Story turned up, including the role of a tax consultant by the name of G. Brint Ryan. Ryan, who typically gets a 30 percent cut of the incentive award he secures for companies, has helped companies get tax incentives in more than half the states in the country, but specializes in Texas, where he and his wife have contributed more than $4 million to state politicians since 2000, and where more than a third of the awards from one of the state’s biggest incentive programs, more than $80 million, has gone to Ryan clients.

MacGillis pointed out that while Story called attention to the hole in education funding that incentive money could be filling, the business programs also affect health care costs, especially since the lower-wage jobs many companies bring to Texas in response to tax breaks don’t include health coverage. 

At the Dallas Observer‘s “Unfair Park,” Eric Nicholson also honed in on Ryan (pictured above), who looms large in the piece, from the opening paragraph’s description of his Preston Hollow home’s “lush gardens with life-size bronze statues” of his daughters to the fact that former Democratic state comptroller (and current Texas A&M chancellor) John Sharp was a Ryan employee when he led the 2005 commission that recommended cutting school property taxes while overhauling the state’s business tax–a move that has fallen well short of the commission’s revenue projections. 

“This wouldn’t be Rick Perry’s Texas without hints of cronyism and conflict of interest,” Nicholson wrote:

At the center of the incentives boom is Dallasite and former City Council candidate G. Brint Ryan, whose namesake company represents Exxon Mobil, Raytheon, and scores of other firms seeking incentives in Texas and elsewhere. He’s a regular at the office of Comptroller Susan Combs, to whose campaign he and his employees have given more than $600,000, and he and his wife have given more than $4 million in political donations in the past dozen years. Several Perry administration officials and current and former lawmakers have found their way onto the Ryan, Inc. payroll.

Nicholson’s takeaway? “Whether incentive deals are a net positive for the people of Texas is a fun debate, but there’s no debating that it’s huge corporations and their lobbyists who benefit the most.”

“I strongly encourage you to read the whole thing, and reflect on the systemic atmosphere of corruption that surrounds the “race to the bottom” of state and local government officials happy to trade off revenues, regulations, every law or ordinance protecting the citizenry, and every shred of self-respect, in exchange for the right to grip-and-grin with “job-creators” at ground-breaking and ribbon-cutting ceremonies,” wrote Ed Kilgore of Washington Monthly, who went on to argue that it’s wrong to assume low taxes and wages are more important than education and quality of life in stimulating economic development. He also called Perry “a throwback, a caveman in a necktie.”

But at the Daily Caller, Jeb Golinkin had a different point of view:

A New York Times investigation has uncovered a shocking scandal they would have you believe involves big corporations blackmailing your state government and stealing tax dollars that should be spent on public education. . . . This scandal, though not identified as such in the article, is called federalism. It finds its roots in the 10th Amendment of the United States Constitution.

An Austin resident, Golinkin scoffed at the fact that Travis County officials fretted in the piece about the way such companies as Apple and Hewlett-Packard are able to dicate their own terms. He continued:

Austin, suffering as it is under the yoke of America’s tech giants, is Forbes’ #1 city for jobs in the entire country in 2012. And lest there remain any doubt that corporations are doing quite well by the citizens of Texas, the same Forbes list places Houston at #2, Fort Worth at #4, and Dallas at #6.

Maybe there is something dignified in drawing a line in the sand on corporate taxes and telling an evil corporation to take its business, and its jobs, to Texas. I am going to go out on a limb, though, and suggest that many of the hard-working Americans who cannot find work right now might take issue with that thinking.

Except, as Edward Aiden of the Council on Foreign Relations argued on its “Renewing American blog, “there is no net benefit to the country–most of the companies are either relocating from other states or would have built new operations somewhere in the United States regardless.” 

“Competition is what drives this country,” Perry countered in the Times story, which noted that he travels frequently to New York, San Diego, San Francisco, and Chicago publicizing the state’s favorable climate to companies who might chose to relocate.

This leads to what Aiden calls “subsidies wars” between the states: “economic foolishness” that distorts competition, which is why, at the international level, most subsidies are against World Trade Organization rules–rules the United States itself demanded that the WTO adopted two decades ago.

Aiden suggests that Congress “should pass legislation that puts in place domestically many of the rules of the WTO’s “Agreement on Subsidies and Countervailing Measures.” The bill would distinguish between prohibited “specific” state subsidies to companies–such as tax refunds or reductions, cash grants, loans or loan guarantees–and permitted government expenditures such as infrastructure, job training, or across-the-board corporate tax reductions that are broadly beneficial to business.

“The politics should be easy,” he continued. “Democrats should readily favor an end to corporate tax breaks that rob state governments of revenue, while Republicans should readily support an end to government interference that distorts competition in the market.”