Richard Florida is a co-founder and editor at large of CityLab and a senior editor at The Atlantic. He is a university professor in the University of Toronto’s School of Cities and Rotman School of Management, and a distinguished fellow at New York University’s Schack Institute of Real Estate and visiting fellow at Florida International University.
Nevada’s Gigafactory deal is just the latest of the roughly $70 billion in incentives governments have given companies since the mid-1970s.
Yesterday, I wrote about the state of Nevada’s winning $1.25 billion incentives package for Tesla’s Gigafactory, estimating the deal works out to between $56,000 and $385,000 per job, depending on how they are counted. But this is far from the only ginormous state hand-out to corporations. According to Good Jobs First, a watchdog group that tracks economic incentives, the number and dollar amounts of megadeals, or those worth $60 million or more, have been growing.
The first chart above, from Good Jobs First, shows the growth in the number of megadeals per year, while the second chart, below, shows the dollar value of these deals.
The value of these deals increased from $100 million in the 1970s to about a billion a year in the 1990s to more than $5 billion in 2003. And incentives hit a sky high $16 billion in 2013, on the backs of Washington State’s whopping $8.7 billion incentives package for Boeing. Two-thirds of the way through 2014, Good Jobs First estimates that incentives already top $7 billion. The Tesla deal comes in the wake of the $2 billion package the state of Oregon gave to Intel in August. For the past three and half decades, Good Jobs First estimates, states have given more than $70 billion in incentives to companies.
My own research and that of others shows there are little, if any, payoffs from such incentives. In fact, as I wrote yesterday, it is common for companies to have their best site already picked out and then use the handy bidding process to garner unnecessary incentive funds. Work from the Lincoln Institute of Land Policy found property-tax incentives are all too frequently given to companies that would have chosen the same location anyway. “So instead of creating new jobs or spurring employment, the main effect of incentives is simply to deplete a community's tax base,” I wrote in 2012. “Since poorer states and communities are more likely to use incentives in the first place, the end result is to undermine the resources and revenues of the places that can least afford it.”