In 2015, lawmakers in North Dakota passed legislation (SB 2057) requiring the legislature to undertake an evaluation of 21 of the state’s tax incentive programs at least once every six years. According to Pew’s Business Incentives Initiative, North Dakota is one of 21 states (four in the Midwest; see map at right) that have passed laws since 2012 requiring regular evaluations of tax incentive programs offered by the state.
Imagine being in your mid- to late 20s and walking into a workplace for the very first time as an employee. For many of today’s young Americans, this delayed entry into the workforce has become a harsh reality. During the Great Recession, unemployment rates soared for all age groups.
But young people were hit particularly hard: In April 2010, the jobless rate for people between the ages of 16 and 24 reached a record high of nearly 20 percent. Today, youth unemployment in the United States still tops 10 percent, more than double the overall jobless rate.
Two years ago, Gov. Terry Branstad announced that he wants 70 percent of Iowa’s workforce to have education or training beyond high school by 2025. Since then, he and state legislators have taken a series of steps to meet that goal.
Using a site where B-24 bombers were made during World War II in a factory built by Henry Ford, Michigan hopes to build on its heritage as a hub of automotive manufacturing and innovation and become the world’s leader in autonomous vehicle technology.
In July, citing the creation of more and better jobs in the state’s thriving automotive industry, Gov. Rick Snyder announced the approval of $17 million in startup funds for the creation of the American Center for Mobility in Ypsilanti.
Lawmakers in two Midwestern states have given close scrutiny in recent months to a targeted tax credit that has become an increasingly popular policy tool for trying to help entrepreneurs and startup companies. Known as “angel investor” tax credits, these incentives encourage investment in early-stage firms by mitigating some of the potential loss if a company fails. Most states in the Midwest have some form of this tax credit.
One policy consequence of the Great Recession was a rise across the country in the use of these waivers, which lift limits on the amount of time that able-bodied adults without dependents can receive payments under the Supplemental Nutrition Assistance Program, or SNAP. If a state does not seek and receive such a federal waiver, its able-bodied recipients can receive food stamps for only three months over any three-year period.
The federal American Recovery and Reinvestment Act of 2009 temporarily suspended these time limits across the country, thus simplifying the process for states to secure a waiver. More recently, though, with jobless rates falling in many parts of the country, federal policy has reverted to pre-recession rules under the Personal Responsibility and Work Opportunity Reconciliation Act.
In recent years, state government has taken a more active role in helping provide citizens with greater access to reliable broadband Internet. By using funding or incentives to encourage providers to expand broadband into underserved areas, policymakers hope to address equity issues involving access, as well as the role that access plays in terms of improved education, economic development and even public safety....
A state-federal partnership that helps small- and medium-sized businesses in the Midwest reach global markets has been reauthorized through 2020. The State Trade and Export Program, or STEP, was included in legislation signed into law in February. It provides states with matching funds to help more small businesses export their goods and services.
In the final weeks of this year’s legislative session, Minnesota Rep. Bob Barrett worked successfully to secure $100,000 in state funds for a city in his home district. The money, which came from an existing economic development program, aims to help the city lower taxes and be more competitive within the state, as well as with neighboring Wisconsin. But as Barrett’s appropriations request made its way to final passage, he had to answer questions from colleagues. What will prevent you, the Minnesota Senate chair asked Barrett during conference committee, from coming back next year and requesting even more money? “If this money doesn’t do what it’s intended to do, then I won’t be coming back,” Barrett told fellow legislators. “But if it works, and we [create] new jobs, new businesses, new property taxes in my area, that would be telling you that it was money well spent, and I will be coming back and asking for more.”
Every state uses tax and financial incentives to attract, retain and expand businesses. The benefits are the jobs and economic activity that these firms bring to a state, but what are the costs? In 2012, a New York Times investigation put the price tag for states and local governments at more than $80 billion, but to a large degree, policymakers have been establishing and continuing these incentive programs without a firm handle on the costs.
That may begin to change in 2017, when a new rule of the Governmental Accounting Standards Board takes effect. It will require state and local governments to report how much revenue they are losing or willingly not collecting as the result of their tax-abatement agreements with businesses.