Evergreen Solar: It’s Time to Reassess Our Corporate Tax Break Strategies

Crossposted on BlueMassGroup

Yesterday’s announcement by Evergreen Solar that it was closing its manufacturing facility at Devens, laying off over 800 employees, is deeply disappointing — and brutal news for a lot of families in my district. It’s also yet another sign that it’s time for Governor Patrick and the Legislature to take a hard look at Massachusetts’ current job-creation strategy of giving large tax breaks to big corporations, and reassess whether it’s a wise one, especially at a time of deep budget cuts that are such a drag on the economy.

Our state government made a substantial investment — nearly $60 million dollars — in Evergreen Solar. We all were hopeful that it would lead to the creation of hundreds of permanent jobs.

It didn’t. It was a public policy failure. We can’t go back and change the past — but we can, as a state, commit ourselves to figuring out what went wrong, learn from our mistakes, and do better in the future. This is the time to change the way we approach economic development as a state.

At a bare minimum, we ought to ensure that every economic development deal our government makes includes a strong clawback provision. (Although there were some clawback provisions in the Evergreen Solar deal, they weren’t strong enough — and as a result, it seems we’ll be getting very little of our initial investment back.) If a company promises to create a certain number of jobs in exchange for a subsidy, and they fail, we should get our money back. This session I will be re-filing legislation to do just that.

(It should be noted that Governor Patrick deserves credits for improving transparency and strengthening clawback agreements through the Life Sciences Center and the Economic Development Incentive Program — but more can and should be done on this front.)

But the truth is, we probably shouldn’t be giving these big subsidies to corporations in the first place. Time and time again, we’ve seen that they just don’t work — companies take big subsidies to create jobs they would have created anyway, or take big subsidies and then ship jobs to China.

The “tax breaks for corporations” economic development strategy is not new, and in fact this approach exists in almost every state across the country, resulting in a “race to the bottom” that forces states to compete against each other  to attract big name companies, all the while often giving away millions of dollars in tax revenue that is rarely recouped by the revenue generated by these very companies.  In Massachusetts, this approach really ramped up the 1990s, resulting in new tax breaks for the mutual fund industry, manufacturers, and more recently alternative energy, biotech and the film industry. (Learn more from the fine folks at Good Jobs First.)

While I acknowledge that these tax breaks have attracted some new companies to come to Massachusetts, and others to stay, the big question is whether this is the wisest use of taxpayer dollars, compared to other investments we could make.

In Massachusetts today, there seems to be a status quo consensus that giving big tax breaks to companies is a good economic development strategy.  But if the state is using precious taxpayer dollars to create jobs at a massive subsidy rate at a time when local aid, human services, health care, environmental protection and infrastructure investments are being cut back, isn’t it the responsibility of public officials to revisit this strategy?  While a group of progressive Democrats have led the fight over the past few years to increase corporate tax credit transparency, the status quo still persists.

The Commonwealth of Massachusetts invested almost $60 million in state grants, tax breaks and subsidized loans in Evergreen Solar to create approximately 800 jobs, translating into about $75,000 in taxpayer dollars being spent for every job. And of course now even those 800 jobs are gone, and we aren’t getting our $60 million back.

Perhaps even more egregious, the long-awaited DOR report on the Film Tax Credit came out yesterday. This report found that in 2009, the film credit created a whopping 222 net jobs for local residents — at cost of almost $325K per job. (Jobs that pay about $51K per year on average, by the way).

Why so low? In part because, as the report points out, when you’re calculating the new jobs in the film industry created by the tax credit, you have to offset that with the jobs lost in the public sector, when state spending is diverted from, say, human services and local aid to the film industry. (At least if you’re going to be intellectually honest about it.)

What if this money for Evergreen Solar and the Film Tax Credit had been used to invest in universal pre-kindergarten programs, or to expand commuter rail service, or to improve water infrastructure?  These programs and services, in addition to providing a direct service to the people of Massachusetts, also play a critical role in economic development. And they can’t just walk away from Massachusetts as Evergreen Solar is doing right now.

Just as we observe how corporate special interests dominate the national agenda and determines what does and does not get passed in Washington, D.C., Massachusetts residents, and elected leaders, need to wake up to the fact that these same interests have far too much influence in Beacon Hill’s agenda.

As the 2011-2012 legislative session begins, it is my hope and plan to generate as much discussion as possible about the wisdom of investing tens of millions of dollars in a risky economic development strategy that could leave us as Evergreen Solar did yesterday – taxpayers holding the bag, and economic devastation that has hurt hundreds of Massachusetts families.

2 thoughts on “Evergreen Solar: It’s Time to Reassess Our Corporate Tax Break Strategies

  • If subsidies will be given out to “create jobs”, at least look at whether those jobs will be permanent, not leaving the state. I propose that small installation businesses, who are registered in state and who pay payroll taxes, get an assistance as follows: In the MassCEC CS2 program, an incentive is available to clients who use Mass-made products. There should be an additiona incentive for installation companies based solely in Mass.

  • Instead of giving credit up front, why not structure an incentive program the same way companies structure employee incentive programs — give an “option” to receive a tax credit that vests over time and on condition that jobs are created.

    Another option which is probably untenable is to level the playing field by not giving any tax breaks under any circumstances. Everyone plays be the same rules all the time.

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