States are using an increasing amount of money withheld from workers’ paychecks for subsidies, and Missouri is among the nation’s top offenders.
More than $700 million a year is funneled to businesses in 16 states, according to research by Good Jobs First, a public policy organization.
The study finds that as states try to keep jobs within their border by handing out money to some of the country’s largest corporations, states may be giving away too much in tax incentives.
“You assume that money goes to schools or libraries, but in these states it goes to the employers,” Kasia Tarczynska, the Good Jobs First analyst who examined the subsidies, told Missouri Watchdog.
Among the 50 states, Good Jobs First reports there are just five programs allowing employers to keep 100 percent of employee’s state withholding taxes, and Missouri accounts for two of those — the Missouri Quality Jobs Program and the Missouri Automotive Manufacturing Jobs Act.
The automotive act was enacted in 2010 to keep Ford Motor Co. from closing its manufacturing plant in Claycomo, near Kansas City. It allows the automaker to keep the state withholdings for 10 years, and it also allows suppliers to keep their workers’ states withholding taxes for five years.
The recipients of the state incentives must invest at least $50,000 per existing job to qualify.
Over the next decade, the program is expected to cost the state $150 million in lost tax revenue.
Ford Motor Co. on Twitter
As reported by Missouri Journal earlier this year, Ford will still qualify for the incentives even after announcing its plan to layoff 1,222 employees.
The auto manufacturer, however, will not be eligible for the incentives until it brings back the workers, which is expected sometime next year.
Ford has already received $1.85 million in other incentives, according to documents released following a Sunshine Law request. Ford received $650,000 for job training last fiscal year and $1.2 million this fiscal year.
The much broader Missouri Quality Jobs Program lets small and expanding businesses keep 100 percent of withholdings up to five years as long as they create 20 new jobs in rural areas and 40 in urban areas.
Technology firms retain up to 6 percent of state withholding taxes for five years, with some firms retaining 7 percent. The businesses must employ 10 workers to qualify, while so-called “high-impact” firms — with high current employment and projected job growth — must have 100 workers.
The cost of the incentive program has risen from $7 million in 2008 to more than $51 million in 2011, according to Good Jobs First, which also provides an online search for corporate subsidies.
For the Missouri Quality Jobs Program, 159 businesses received incentives for 189 projects in 2011, according to the annual report published by the Missouri Department of Economic Development.
Express Scripts Inc. on Twitter
The Missouri General Assembly created the job incentives program in 2005 when Express Scripts Inc. considered moving its headquarters.
After the legislation passed, Express Scripts executives decided to keep the company’s headquarters in the St. Louis region, and the company has since collected around $17 million in taxpayer-funded subsidies.
Express Scripts was criticized for outsourcing many of its U.S. jobs overseas. Meanwhile, as the St. Louis Post-Dispatch reported last year, the company’s profits soared 325 percent between 2004 and 2010.
In the battle to keep companies, the squeaky wheel continues to get more grease, said Peter Mueser, a labor economist at the University of Missouri. He said state legislators are likely to enact more incentives.
“They’re not going to lower taxes on the ones who plan to be here long term,” Mueser told Missouri Watchdog. “This gives firms an incentive to try to move so they can be eligible for those subsidies.”
Earlier this year, the Missouri House Committee on Government Oversight and Accountability questioned leaders from the state’s economic development department after its own report showed that less than 6,000 jobs had been created, although more than 23,000 new jobs were promised.
Missouri Sen. Bill Stouffer, a Republican from Napton, told Missouri Watchdog he has become less enthusiastic about corporate subsidies, comparing the economic development practice to extortion.
“I think the legislature should foster a friendly business climate for everybody. That climate should be fair with an opportunity for growth,” said Stouffer, who has served the term-limited maximum of eight years in the Missouri Senate and is among three GOP candidates running for secretary of state.
“I don’t like blackmail. If we continue giving it away, we’re going to continue to get blackmailed.”
By Johnny Kampis, Missouri Watchdog, [email protected]
Brian R. Hook, [email protected], (314) 482-7944, contributed
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