California Gov. Jerry Brown, left, recently launched the California Competes incentive program. Texas Gov. Rick Perry, right, has touted the Texas Enterprise Fund as a “job-creation machine.” (Rich Pedroncelli / Associated Press and Mengwen Cao / Associated Press)
By Chris Kirkham
August 24, 2014
When California rolled out a $750-million plan this year to attract and retain businesses, many aspects mirrored longtime perks used by Texas — where officials love nothing more than stealing jobs from the Golden State.
For more than a decade, Texas Gov. Rick Perry has touted the “deal-closing” Texas Enterprise Fund and other cash incentives as a “job-creation machine.” A fifth of the companies that Texas attracted during the last funding cycle, in 2011 and 2012, were based in California.
Now California is firing back. In the state’s first tax credit awards in June, more than 40% of the $29-million package went to companies that have gotten similar offers from Texas: Samsung, Petco and Amazon.
But as California embarks on a major effort to woo businesses, a decade’s worth of experience in Texas raises questions about the wisdom of buying jobs from corporations with taxpayer dollars.
Texas has given out more than $500 million from the Enterprise Fund — and hundreds of millions of dollars more in local property tax breaks — to entice businesses to the Lone Star State. But many legislators there now question why Texas has paid so much to companies that account for a tiny fraction of the state’s job growth.
Outside groups for years have alleged that Perry has overstated the number of jobs created; failed to recoup money from companies that break job-creation promises; and steered funds toward well-connected campaign donors.
The Texas Enterprise Fund showered $40 million this year on Toyota Motor Corp. when the company announced plans to move its North American headquarters from Torrance to Plano.
But as Toyota officials made clear, incentives had little if anything to do with the decision. Rather, the company — the world’s largest automaker — wanted to consolidate its U.S. operations closer to many of its manufacturing plants in the South.
Economists and public policy experts also point to the fairness issues — and potential for corruption — that are inherent in giving government officials the power to pick companies for multimillion-dollar grants. They also question how much such gifts affect corporate decisions to relocate or expand.
“The incentive structure is all in favor of spending too much, and spending it when you don’t need to,” said Peter Fisher, a professor emeritus of urban and regional planning at the University of Iowa who is an expert on state tax incentives.
But the incentives have become so commonplace that it is difficult for politicians to sit on the sidelines.
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