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Monday, July 30, 2018

Raimondo says her incentives spur job growth

By Will Weatherly in Rhode Island’s Future

Image result for corporate welfareGovernor Raimondo’s support for corporate incentives have become a contentious frontline in the race for governor. 

Both Democratic candidate Matt Brown and Republican candidate Allan Fung have attacked her commerce incentive programs (such as the Rebuild Rhode Island Tax Credit) according to a report in the Providence Journal on Tuesday. 

The article shows Gov. Raimondo reflecting critiques back on Fung and Brown, saying that without the economic growth spurred by her incentive program, “A lot of people are going to lose their jobs if either of those men become governor and it is time we focus on that risk.”

But are corporate incentives and job growth as closely aligned as the governor argues they are? 

Doug Hall, director of economic and fiscal policy at the Economic Progress Institute, told RI Future earlier this month that it’s more complicated than a simple equation of the two. 

“If a corporation says we need a million dollars in tax credits, and we’re going to create X number of jobs,” Hall said, “you give them a million dollars, they create the jobs, but that doesn’t mean they wouldn’t have created those jobs in the absence of the tax credit.”

As RIPR reported in March, actual evaluations of Rhode Island’s business tax incentives have been scarce, and some of the data we do have is more discouraging than Raimondo’s optimism lets on—for example, the Motion Picture Tax Credit, which has lost the state around $1.8 million annually according to an evaluation conducted by the Department of Revenue.

Just as it’s difficult to directly link tax incentives with the growth they court, it’s hard to say that doing away with incentive programs would reverse economic growth, either. 

Hall pointed to Electric Boat, the General Dynamics subsidiary and submarine manufacturer in Quonset

In total, Electric Boat has requested $20 million in tax incentives (a $2 million Rebuild Rhode Island tax credit and $18 million in exemptions in sales and use taxes) according to the Rhode Island Commerce Corporation. 

In May, the Providence Journal reported that Electric Boat’s expansion would bring 1,300 additional jobs to the state. 

But as Hall points out, “there’s huge physical infrastructure there, which they’ve invested millions of dollars in… I suppose the assumption might be that if we didn’t give them this money in perpetuity, they might leave. That might be the case, but for some of them it’s probably not the case.”

CVS has historically taken a lion’s share of state incentives, obtaining $175 million in subsidies out of $350 million doled out since 2008, according to a report from Alex Nunes earlier this year. 

That report highlights how, between 2014 to 2017, CVS employees and their dependents received $5.7 million in Medicaid-funded medical assistance—on top of their employer receiving $63 million in tax benefits during the same period. 

Linda Katz,  EPI’s policy director, told Nunes this raises “a fundamental issue about public-private partnerships and the responsibility of companies themselves.”

The Brown campaign used a similar argument in its line of attack in a press release Tuesday. 

“Corporate welfare has been discredited as an economic development strategy time and again,” it read. “Governor Raimondo’s agenda of paying out-of-state companies taxpayer money—transferring wealth from the public to wealthy corporations—has taken a system that creates massive inequality and exacerbated it.”

“The levels of incentives we’re giving to some of these corporations, while they take a bite out of the Rhode Island budget, are relatively small in the context of various revenue streams of those corporations,” 

Hall said. “As an economic actor, CVS is a bigger entity than the state of Rhode Island. I have some skepticism as to whether or not continued forgoing of tax revenue, in some of those cases, is actually required and whether it’s actually continuing to yield a return on the initial investment.”  

Gov. Raimondo’s programs may have helped the state remain inviting for new business over the last several years, and Hall says it “makes sense” to try and nurture that development. But as the governor remains fierce in her fight for Rhode Island to stay competitive, arguing “all of those jobs are at risk” under Fung or Brown, she might be presenting voters with a bit of a false choice: incentives or bust.

Will Weatherly is a contributor to RI Future and a senior editor at the College Hill Independent. He lives in Providence, RI. You can follow him on Twitter @willbweatherly.