Let’s get our biases out of the way first: we’re not fans of the Governor’s Office of Economic Development (GOED). While we all want to see new job creation, a healthy economy, and companies choosing to locate in this state, we emphatically reject the idea that these praiseworthy ends justify whatever means are deemed necessary to obtain them.
This article focuses on those means.
Libertas Institute has obtained and analyzed the minutes of GOED’s Board of Directors meetings since its inception in 2005. These minutes document all of the various incentives GOED has offered to private corporations and other organizations, as well as the votes taken on each.
By our count, 336 separate incentives have been offered in just over eight years for an average of about 40 per year. Note that we tried to eliminate double references—from time to time, GOED would have a separate vote for an incentive that was for a revised application or in a higher amount. In these cases, we removed the previous incentive from our list, keeping only the latest one.
GOED’s incentives are largely post-performance tax credits. If a qualifying company achieves their agreed upon goals, such as hiring a certain number of employees and paying them a certain percentage over the county’s average salary amount, then the company receives tax credits. In other words, by having to spend less of its revenue on taxes the qualifying company is able to receive an advantage over any competitors who have to pay the full tax burden.
These incentives have added up to over $800 million thus far, with an average of almost $2.5 million per vote.
What’s most alarming, however, is the makeup of each of these votes. Despite having many people on its board (where one would assume there might be disagreement from time to time), only two board votes in GOED’s history have ever received an opposing vote! Put differently, on almost every vote in which it doles out tax credits to private companies, GOED’s board votes unanimously.
GOED’s incentives are given to local companies looking to expand, or out-of-state companies looking to come to Utah. They are given to companies who have in-state competitors—competitors that are put at a tax burden disadvantage—with no apparent regard for the “free market” to which so many in Utah’s government like to pay homage.
GOED officials subscribe to the Keynesian theory that the economy is like a pump that needs a government primer. Without these incentives, they argue, businesses will locate elsewhere or won’t expand within the state. This theory is only a theory, and some evidence suggests it may not be true.
While we all want a vibrant economy, government’s legitimate role is to step out of the way—not try to centrally plan it. Because we advocate for a free market we believe GOED should be stripped of its ability to dole out tax credits, thus preventing government from favoring some at the expense of others. At a minimum, we recommend tax credit limits and greater legislative oversight to ensure that lawmakers share in the accountability of how private companies are being financially rewarded by the state.