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Public school students in the U.S. suffered poorer schools—and local and state taxpayers paid higher taxes—in 2019 due to corporate tax breaks; economic development tax abatements given to corporations cost public school districts at least $2.37 billion in foregone revenue in FY 2019. This report presents case studies from schools in Louisiana, Missouri, New York, South Carolina, and Texas where schools are losing significant revenue to tax abatements. Additionally, this report makes recommendations to these states and offers suggestions to the Governmental Accounting Standards Board (BASB); these recommendations include capping the share of each locality’s property and sales tax base that can be abated in the name of economic development, giving school boards control to opt in or out of tax-break deals, requiring all governments that are making abatement agreements to report the costs of such deals to all affected jurisdictions, and more.
The City of Memphis has deliberately avoided its municipal pension obligations at the same time it has granted a series of costly property tax abatements, such as payments in lieu of taxes (PILOTs), to large corporations and sports franchises. For every year between 2009 and 2012, the revenues lost by Memphis to economic development subsidies exceeded the annual cost of funding the city’s pension system. This report outlines the burdens of PILOTs, and ultimately determines that Memphis’ spending on subsidy deals is eroding the revenues needed to adequately fund public services.
Tech companies have been rapidly expanding their networks of facilities that store and retrieve digital information through the creation of new data centers. State and local governments routinely subsidize these projects, providing traditional subsidies, such as local property tax abatements and investment tax credits, and even establishing incentive programs specifically for data centers. However, subsidies come at the last stage of the data center site selection process and often don’t function as true economic development incentives; that is, they don’t cause something to happen that wouldn’t otherwise. Instead, public officials pay companies to do what they were already planning to do. To avoid such overspending, this report recommends that states and localities fully disclose deal-specific and aggregate program costs (starting when a deal is being negotiated) and cap all state and local subsidies combined at $50,000 per permanent job, and urges public officials to walk away from excessive data center subsidy demands.
Public school districts in South Carolina suffered a sharp increase in lost tax revenue in FY 2019 due to tax breaks granted to private corporations by county governments. The revenues of South Carolina’s school districts are reduced via state permitted programs that grant businesses tax abatements for extremely long periods of time, which could effectively be permanent exemptions. This report offers a variety of policy options to protect the public education system from corporate tax abatements; these include shielding school finance and implementing a county-based disclosure system to ensure that costs and benefits are fully visible for each employer granted an abatement.
Over the past decade Nissan has created thousands of manufacturing jobs in Mississippi. While the company has spent considerable amounts of its own money, it has also received large amounts of financial assistance from taxpayers at the local and state levels. This report documents the varieties of economic development subsidies the company has been offered, including corporate income tax credits, rebates of withholding taxes, site preparation and infrastructure grants, training grants, and property tax abatements. It also reveals that in total, the value of the state and local subsidies offered to the company in Mississippi is $1.3 billion, which is considerably more than has been reported.
The Governmental Accounting Standards Board (GASB) Statement 77 requires most state and local government bodies, including school districts, to annually disclose the costs of corporate tax abatements. As a result of the new rule, thousands of America’s public school districts are reporting how much revenue they lose to corporate tax breaks granted in the name of economic development. This report examines the financial reports of more than 5,600 independent school districts and found that some school districts are losing significant sums of vital funding to tax abatements, and that abatement dollars, if redirected, could help restore better-quality education. Additionally, this report recommends that school districts should be mandated to adhere to the Generally Accepted Accounting Principles (GAAP) and publish their Statement 77 data, and that exclude school revenue from abatements.