On Sunday, the Columbus Dispatch reported that John Kasich and his economic development team will be moving away from using assorted tax incentives to attract and retain businesses in Ohio. The governor hardly could have been more emphatic: “Giving away the store and getting into bidding wars — I tell all CEOs now if that’s what you think we’re going to do, you’re wrong, because we are not going to get into bidding wars with other states.”
It is hard to overstate the change of direction. Remember the governor seeking to lure Sears from the Chicago area with a package worth hundreds of millions of dollars? In October, the Dayton Daily News reported that the Kasich team approved $488 million in taxpayer-subsidized tax credits, grants and low-cost loans for businesses last year. That amounted to a 44 percent increase over 2010.
Such incentives are a familiar economic development tool for states, suggesting the governor hasn’t brought innovation to the state’s approach as much as he has done far more of the same.
What the Daily News explored, and the Dispatch reinforced, are the keen questions about the value in such packages. Recall the $93.5 million in incentives for American Greetings to move across the Cleveland area. Or the $78 million exemption from the commercial activity tax for Marathon Petroleum to stay in Findlay. Or the $17 million for Bob Evans Farms to move from Columbus to suburban New Albany. It is fair to ask in these and other instances: Has public money been well spent?
The job retention tax credit, for instance, originally targeted manufacturing firms. Yet it has been steadily expanded through Democratic and Republican administrations, Kasich loosening the criteria even more. The commercial activity tax was supposed to curb substantially the use of incentives, its low rate and broad base attractive enough. Yet almost immediately, exemptions and other breaks started surfacing.
A year ago, Mike DeWine, the state attorney general, issued a report that found the compliance rate under the job creation tax credit was 52 percent. The trouble is, effective analyses of incentive packages too rarely are performed. Ohio has enjoyed stronger job creation the past two years. What role have the incentives played, as opposed to other factors?
That’s not to say all such relief is problematic. Some incentives are crucial. What invites concern is the perception that the packages are more about role-playing, businesses reaching for what is available, politicians going for the headlines about jobs.
Thus, it is encouraging to learn the governor is heading down other paths. His experiment in privatizing economic development, JobsOhio, has yet to take full flight, its more innovative elements pushed aside, its resources tied up in a court fight. The Dispatch cited his wish to create a broader, friendlier business climate.
For sure, the governor will have his eye on tax rates and regulations. What is indispensable is investing adequately in the building blocks of a state economy — people, public works and the engines of new ideas.