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.”