Legislators push for transparency with tax credits
Tennessee lawmakers this week are considering a pair of bills that would require more transparency about the economic impact of business tax credits.
The push for disclosure comes after a state-commissioned report showed some of Tennessee’s tax breaks had mixed success, with millions of revenue forgone.
Businesses are awarded tax credits for hiring new workers, for buying industrial machinery, and other behavior intended to stimulate the state’s economy. Tennessee gives businesses about $142 million each year in tax credits, the study found, and the companies significantly boost hiring under some credits, but not others.
Currently state law requires an evaluation every four years, while the new legislation would require annual reporting. “We have a finite amount of money that we can devote to credits, and we want to make sure that we have the most effective ones,” said House Minority Leader Craig Fitzhugh.
Fitzhugh, D-Ripley, and Sen. Jeff Yarbro, D-Nashville, want the Department of Revenue to report the amount of franchise and excise tax credits awarded and the number of jobs created by companies that received the subsidies. If a proposed amendment is adopted, the jobs figures would pertain specifically to companies that received credits based on promises of new hiring. Not all of the state’s tax credits are tied to job promises. The Industrial Machinery Tax Credit, for instance — the state’s largest — is based on the amount of equipment companies buy.
In December, Anderson Economic Group showed that the Jobs Tax Credit generated an average of 600 jobs per year and cost the state an average of $52.1 million annually from 2011 to 2014. That equates to about $87,000 per job, including both direct hiring by the company receiving the credits and indirect hiring at other companies. The Industrial Machinery Tax Credit cost the state $66.7 million annually during the same time frame, but the economists could attribute only 55 new jobs per year to the tax break. That comes out to $1.2 million per job, according an analysis of the report by The Tennessean.
State economic development officials later disputed that calculation because the industrial machinery credit is not just for job creation, they said, but is “designed to encourage manufacturers to make investment in advance industry equipment and boost productivity.”
Bradley Jackson, president of the Tennessee Chamber of Commerce and Industry, said his organization wouldn’t oppose the additional transparency, as long as the legislation didn’t allow the state to reveal individual companies’ financial information. A proposed amendment would keep that information confidential.
Source: Knoxville News Sentinel, by MIKE REICHER
The East Tennessee Economic Development Agency markets and recruits business for the 15 counties in the greater Knoxville-Oak Ridge region of East Tennessee. Visit www.eteda.org