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TCPR Questions Merits, Fairness of Tax Incentives

The Tennessee Center for Policy Research was often critical of the Bredesen administration for its incentive packages aimed at attracting business. And now the nonprofit free-market think tank is scrutinizing the Haslam administration for the same issues.

TCPR issued the 2011 edition of its annual “Pork Report” Tuesday, saying it has found $371 million that state and local governments in Tennessee have wasted over the last year.

The report takes immediate aim at $140 million in state and local funds that will go to appliance maker Electrolux to build a manufacturing plant in Memphis. That deal was struck by former Gov. Phil Bredesen’s economic development team, but the Pork Report notes that current Gov. Bill Haslam has pledged $97 million in taxpayer money to follow through on the commitment.

Haslam has consistently said he intended to honor such commitments made by the Bredesen administration. House Republican Majority Leader Gerald McCormick told TNReport recently that while he finds it “distasteful” to offer tax incentives to entice companies to relocate to Tennessee, “unfortunately, that’s the playing field that we’re on.”

As with previous years, the Pork Report hammers on prodigal politicians and big-spending bureaucrats who in TCPR’s view play far too loose with tax dollars. Taxpayers can ill afford ill-advised spending in these troubled times, said TCPR president Justin Owen, who added that spending done in the name of stimulating the sluggish economy is often particularly suspect.

“As this year’s Pork Report shows, it’s times in economic calamity where citizens are faced with waste in their government as government tries to fix the economic problems,” Owen told reporters at a press conference Tuesday.

“We see this year in the Pork Report hundreds of millions of dollars being spent on economic development incentive packages, on energy and environmental programs,” he added. “While these things are often sold as a way to spur job growth, particularly the economic development incentives, they amount to nothing more than taking money out of certain taxpayers’ pockets and handing it to others — oftentimes large corporations in the form of corporate welfare.”

Owen said rarely have proponents of incentive packages demonstrated an appreciation of existing businesses.

“I will say that Gov. Haslam has signaled his intent to re-evaluate this process,” Owen said. “You saw just this morning, with Startup Tennessee, he is wanting to start focusing on some of those existing Tennessee businesses.

“We encourage that, and we hope that his administration will continue to move in that direction rather than continue to hand money to certain companies at the expense of others.”

But Owen said the state has spent “wildly” on environmental programs.

“We all know about the former governor’s affinity for solar energy, and it appears this governor will keep that going,” Owen said. “We have another $14.5 million going into innovative project grants for solar, even though solar accounts for a very tiny sliver of the overall energy market.”

Owen said the state will spend another $13 million to buy forests and wetlands in conservation efforts across the state and pointed out that the land is being bought with funds from the real estate transfer tax, meaning the land is being purchased on the backs of homeowners.

The Pork Report itself is a 28-page booklet that identifies what the authors call “waste, fraud, abuse and mismanagement of taxpayer money by state and local government officials.”

“Despite a changing political landscape in Tennessee, wasteful government spending has not disappeared,” the report says.

The report does offer some solutions, calling on the Legislature to enact stricter spending laws. It calls for a “kicker” law that would require the state to “kick” surplus funds back to taxpayers. It says the state should strengthen the Copeland Cap, which has been on the books since 1978 and prevents the Legislature from increasing spending beyond the rate of personal income growth. TCPR says since a simple majority can override the Copeland Cap, that should be changed to a two-thirds vote requirement.

The governor’s office responded to the report.

“Governor Haslam is proud of the budget, which passed unanimously in the General Assembly and includes key investments, strategic reductions and savings for the future,” said David Smith, press secretary for Haslam, in an e-mailed statement Tuesday.

“He is focused on making Tennessee the No. 1 location in the Southeast for high-quality jobs, and while economic development incentives play a role in that process, it is also why he is focused on improving education and ensuring Tennessee has an attractive business climate.”

TCPR’s report also cited $13 million in federal stimulus funds going to the Port of Cates Landing in northwest Tennessee, noting Haslam has devoted $7 million from the state budget to help build the port. The Pork Report says statements by local leaders suggest “corporate welfare” might not have been necessary for the port, saying private money was secured to build the port if state and federal money didn’t.

The report criticizes $2.5 million in tax credits for purchasers of the electric-powered Nissan Leaf, which the report says could result in an increase in state gas taxes. Likewise, it challenges funds going to Wacker Chemie, the German chemical company locating a plant in Bradley County, and notes Haslam has pledged $34.6 million in the budget to expand the plant. The Wacker deal was another Bredesen project.

Elsewhere, the report takes a swing at state-run golf courses, calling for raising the greens fees or leasing the state’s courses to private businesses. The report called the course at Pickwick Landing State Park a “money-sucker,” saying it has cost the state $1.7 million since 2005.

On local government, the report takes note of news reports saying Davidson County Criminal Court Clerk David Torrence worked only three days a week, sometimes two, concluding he worked only 50 percent of the time for a job that pay $125,000 a year.

Ben Cunningham, spokesman for Tennessee Tax Revolt, called TCPR “an extraordinary resource to this state.”

“The most important budget of all is the family budget, the taxpayers’ family budget,” Cunningham said. “All other government budgets must first come from that family budget, and if that family budget is not healthy those other budgets will not be healthy.”

Bredesen Busy Traveling, Lecturing, Promoting Health Policy Book

Former Gov. Phil Bredesen remains zip-lippped about what’s in the state’s deal with Amazon.com, although he has plenty to say about what he’s been doing since leaving office, which is traveling the country making speeches, mostly about health care.

“I’m not retired. I’m not vegetating,” Bredesen said. “I’m very active and trying to figure out how I can best use the next few years.”

Bredesen was at a campaign event Saturday in support of Nashville Mayor Karl Dean, who is running for re-election.

Nashville is still home base for Bredesen, but since leaving office in January he has traveled to various locations, from Chicago to Florida to the West Coast, to speak. He has primarily talked about health care, including one joint appearance with former Florida Gov. Jeb Bush, but he has also spoken on the state’s experience recruiting international businesses like Volkswagen and Wacker Chemie.

One domestic business recruitment with Bredesen’s brand on it, however, remains a point of controversy in the state. Amazon is building two large distribution centers in and near Chattanooga. The Internet sales giant is making a $139 billion investment, offering 1,400 jobs and comes in with the agreement that it will operate without collecting sales taxes as a retail outlet would.

A couple of key lawmakers have cried foul, presenting legislation to force Amazon to collect the tax, but that effort has met resistance and even a threat from Amazon that it might pull out if forced to collect. Lawmakers have even asked the state’s attorney general to weigh in on their effort. The bill has been deferred to 2012.

Among lawmakers’ questions have been to what degree the agreement with Amazon has even been in writing.

“I’m just not commenting on stuff that’s going on like that right now,” Bredesen said. “We had an understanding with Amazon, and it was really Matt Kisber (former commissioner of Economic and Community Development) who did all the detail work on the thing.

“I think it was the right decision. I think the current governor thinks it was the right decision to get them here. I think they will be an important piece of the economy.”

The Bredesen administration made the deal after Bill Haslam was elected governor in November but before Bredesen left office. The most widely reported explanation for the arrangement has been that Bredesen told Haslam the state could either grant Amazon the ability to avoid collecting the tax or see the company go a few miles down the road and build its facility in Georgia. The same issue has played out in other states. Bredesen wanted the jobs in Tennessee, and Haslam has publicly said the state will honor the commitment.

Bredesen said there were compelling reasons for striking such a deal.

“Part of what appealed to me about Amazon was I worked real hard to get some of the knowledge-based jobs that require a college education, where you’ve got good salaries and so on,” Bredesen said. “A lot of the Amazon jobs are a little different from that. They’re working in a warehouse. We need those jobs, too.

“There are a lot of people in this state who just need a job with a good company with good benefits, and they’re not going to go back to college to do it.”

When asked last week where the attorney general is on the Amazon issue, Sharon Curtis-Flair, spokeswoman for Attorney General Robert Cooper, said, “We’re working on it,” but she offered no elaboration on a potential opinion or when it might come.

Bredesen said getting a well-respected company like Amazon to build in Tennessee at a time when jobs are hard to come by seemed like the right deal to make. He was asked about the precedent, however, of setting up that arrangement, since Amazon is already making overtures of building even more distribution centers in Nashville or Knoxville.

“I think the governor has got to figure that out,” Bredesen said. “But in the scheme of things, if an Amazon were to be located here, ultimately these tax issues are going to be solved by the Congress.”

Haslam has also said no single state should have to work out the issue of collecting sales taxes on online sales. The issue is complex. Amazon is based in Seattle. Company officials point to the commerce clause of the U.S. Constitution and say the existence of a “fulfillment center,” as Amazon is building, does not create substantial presence, known as nexus, to qualify as a point of sale.

“The two facilities happened on my watch, I think we made the right decision, I think the governor has backed that up, and how he treats the next two or three is up to Gov. Haslam,” Bredesen said.

As for the former governor’s travels, they’re the kind of speaking engagements one would normally expect after the publication last year of Bredesen’s book, Fresh Medicine — How to Fix Reform and Build a Sustainable Health Care System.

“I had a lot of requests to do that after the book came out in the fall, and you really can’t do it as a sitting governor,” Bredesen said. “You can’t take off and go to California for a few days and give speeches.”

He said the topic in such settings is beginning to move more toward the future of the health care system, rather than just reaction to the health care reform law. Bredesen’s book is due for a paperback version this fall.

“I’m up to my eyebrows in health care,” Bredesen said.

The event with Jeb Bush was a health care discussion held by the venture capital group Health Evolution Partners, where they had a “D” and “R” program, with Bredesen the “D” as a Democrat and Bush the “R” as a Republican.

Bredesen said he has put the notion of trying to serve at the federal level on health care policy on the shelf, adding that when it came up it was probably given more attention than it deserved. He also said Saturday he has no intention of running for the Senate. Bredesen was at one time considered a candidate to be President Barack Obama’s secretary of Health and Human Services, which ultimately went to Kathleen Sebelius, a former governor of Kansas.

So for now, Bredesen is doing the speech-making tour and deciding what’s next. Bredesen was mayor of Nashville for two terms from 1991-99 and governor for two terms from 2003-2011.

“When I left the mayor’s office, after I left on Saturday, on Monday morning I was setting up my desk in a new office,” he said. “I’ve said this time, don’t do that, when you’ve got one more good career in you. Get a little space. Get some of these speeches done you wanted to do. Do a little writing, and let things gel a little bit.”

Bredesen said former first lady Andrea Conte now “enjoys being out of the line of fire,” and she’s doing a lot of the same things as her husband is.

“She’s been out and active and around doing different things, giving talks to different groups. She is spending serious time in the garden, and we’re having a great time right now,” said former governor Bredesen.

Mike Morrow is a correspondent for TNReport.com, a not-for-profit news organization supported by donors like you.