Money for Something?

Economic development tax subsidies are a large, and often obscured, part of Maryland’s budget. A report today by Good Jobs First (GJF) sheds some light on these programs and the safeguards built into them. Money for Something: Job Creation and Job Quality Standards in State Economic Development Subsidy Programs does what the title says; evaluate individual state programs based on job creation, job retention, wage, and healthcare requirements.

First the good news: GJF ranked Maryland fifth in the nation in terms of performance and job quality standards. However, individual programs fared less well. The five programs GJF looked at were:

• Enterprise Zone Real Property Tax Credit – requires recipients to hire new employees or make capital investments. Score: 15/100
• Job Creation Tax Credit – requires recipients to create 60 positions (limit is lower under certain conditions) for three years. Score: 60/100.
• MD Economic Development Assistance Authority Fund (MEDAAF) – requires a 5 to 1 investment for every dollar received, and includes a vague requirement for “significant” job creation or retention. MEDAAF replaces the Sunny Day Fund. Score: 95/100.
• One Maryland Tax Credit – requires recipients to create 25 jobs within two years, for at least one year. Includes some support for start-up costs. Score: 75/100.
• Sunny Day Fund – required “substantial” job creation, and a 5 to 1 investment for every dollar received. Score: 95/100.

See the Maryland appendix for more detail on GJF’s scoring.

In a time when Maryland is struggling to find enough revenue to pay for needs in education, health care and public safety it is important to remember that these tax subsidy programs combined account for roughly $76.5 million in tax side spending. Policymakers should make sure that these investments are generating the returns Maryland needs.

Part of the reason tax side spending is so obscure is that, unlike expenditures in the budget, they don’t have to be renewed. Once the debate over a particular tax credit ends, it recedes from the public eye unless legislators take positive action to try and end it. In an effort to improve the accountability of these expenditures MBTPI supported HB 620, which would have required sunset provisions for tax credit legislation, in the 2011 legislative session. The legislature should enact similar legislation in 2012 to ensure tax provisions continue to promote the general interest over time.

Look for GJF’s follow-up report looking at states’ monitoring and enforcement of these subsidy standards.