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State and Local Government / Transparency

Where Are the Promised Jobs and Economic Activity?

By Christine Harbin on Dec 6, 2010

Last May, IBM received $28 million in state tax credits and $3 million in incentives from the local government to open a call center in Columbia. According to a recent article in the Columbia Tribune, the project has yet to deliver on the 800 jobs that it promised.

The interior of the Columbia building is primarily open space, with a few conference rooms partitioned away from the main areas. Yesterday, the spacious rooms were filled with row upon row of empty cubicles, furnished with telephones and lime-green desk chairs, but few computers. A handful of employees worked quietly among a sea of empty desks.

This is not an isolated example. Unfortunately, it’s a pervasive problem in Missouri. According to an article from the Associated Press (hat tip: Audrey Spalding):

Missouri has levied more than $1 million of penalties against dozens of tax credit recipients for violating a state reporting law intended to gauge whether their projects actually are producing the promised results.

Records provided to The Associated Press show 56 businesses, nonprofit groups and individuals have failed to meet the mandates of a 2004 state law that requires annual progress reports after receiving tax credits.

The list includes major employers such as Harley-Davidson Motor Co., as well as numerous developers who got historic preservation tax credits to remodel old buildings.

There are two problems here. The first problem is that targeted tax credits are an overhyped tool for economic development and they tend to fail to create the jobs and economic activity that they promise. The second problem, as illustrated in the second article, is a logistical one: Missouri is awarding tax credits at such a high rate, it can’t keep up with the required paperwork. This is bad news for taxpayers in Missouri because it means that they are stuck subsidizing failing projects.

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Christine Harbin

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