A researcher believes tax breaks that states give to corporations prove to be detrimental in the long run. "Here's the problem: somebody has to pay," said Timothy Collins, Assistant Director of the Illinois Institute for Rural Affairs at Western Illinois University.
“When corporations come in they need facilities, they need highways, water, (and) other forms of transportation. You’re constantly giving tax breaks and the state is paying for the new infrastructure development.”
Collins authored a newly released book, Selling the State: Economic Development Policy in Kentucky. He said it’s free through the IIRA website.
Collins said he chose to study Kentucky’s economic policies because they remained fairly consistent during the latter half of the 20th Century, even through changes in the governor’s office and the legislature.
He said Kentucky was one of the first states to start giving assistance to businesses through loans and tax breaks. He said Kentucky eventually instituted a sales tax to help cover the costs.
“A sales tax is naturally regressive. It falls harder on people of lower income than it does on those of higher income,” Collins said.
“So when that was done, and with taxes on necessities such as food and medical items and the like, the working people of Kentucky had to pay for this development.”
And he said the state began granting more and more sales tax exemptions to businesses, placing a further burden on workers.
Collins said the following statistics for Illinois, Iowa, Missouri, and Kentucky came from the New York Times (estimates are for 2012):
Illinois
Illinois spends at least $1.51 billion per year on incentive programs, according to the most recent data available. That is roughly:
- $117 per capita
- 5¢ per dollar of state budget
- Top Incentives by type
- $874 million in Sales tax refund, exemptions or other sales tax discounts
- $452 million in Corporate income tax credit, rebate or reduction
- $11.9 million in Personal income tax credit
- Top Incentives by industry
- $433 million in Agriculture
- $207 million in Manufacturing
- $109 million in Retail
Iowa
Iowa spends at least $223 million per year on incentive programs, according to the most recent data available. That is roughly:
- $73 per capita
- 4¢ per dollar of state budget
- Top Incentives by type
- $145 million in Corporate income tax credit, rebate or reduction
- $22.6 million in Personal income tax credit
- $15.9 million in Cash grant, loan or loan guarantee
- Top Incentives by industry
- $12.2 million in Alternative energy
- $10 million in Film
- $3.25 million in Agriculture
Missouri
Missouri spends at least $96.5 million per year on incentive programs, according to the most recent data available. That is roughly:
- $16 per capita
- 1¢ per dollar of state budget
- Top Incentives by type
- $93.2 million in Corporate income tax credit, rebate or reduction
- $3.35 million in Cash grant, loan or loan guarantee
- Top Incentives by industry
- $7.02 million in Finance
- $4.97 million in Insurance
- $1.56 million in Film
Kentucky
Kentucky spends at least $1.41 billion per year on incentive programs, according to the most recent data available. That is roughly:
- $324 per capita
- 15¢ per dollar of state budget
- Top Incentives by type
- $264 million in Personal income tax credit
- $108 million in Sales tax refund, exemptions or other sales tax discounts
- $69.2 million in Corporate income tax credit, rebate or reduction
- Top Incentives by industry
- $569 million in Oil, gas, mining
- $341 million in Agriculture
- $180 million in Manufacturing
