The indefatigable US-based organisation Good Jobs First has sent a fascinating email, which relates to the United States but could have general relevance for other countries. This one is located at the fascinating, busy intersection between tax and transparency.
“For many years, we at Good Jobs First have criticized GASB-the Governmental Accounting Standards Board, or “GAZ-bee”- for failing to require state and local governments to disclose economic development subsidy spending in a uniform way.
It appears that’s finally about to change, and if it does, it will be hard to overstate the significance of the news.
As the group that has been successfully shaming states and cities to disclose on subsidies all these years, with our 50-state and 50-locality “report card” studies, and as the group that has been collecting all the public data-and also lots of previously unpublished data-in our Subsidy Tracker database, we are intimately familiar with the irregularities and gaps that exist in these vital public records. And we have long shown how to fix them in our model legislation.”
Their generic criticisms and analysis, of course, are extremely valid, for any country. And they continue:
“Now, GASB is preparing rules that say: to meet GAAP, governments will have to publish an annual accounting of the revenue lost to economic development subsidies. The proposed wording of these rules has not been issued; all we have are board-meeting minutes of a low-profile process spanning more than two years, as GASB gathers information and debates how best to achieve this new standard.”
Now this is an interesting, and welcome, development. Investors welcome it, and citizens welcome it.
That’s the gist of it. For those who want the details, see here.
Endnote: the tax specifics are summarised:
“GASB is using the term “tax abatement” as an umbrella term (not just specific to local property tax exemptions) but “a reduction in taxes… in which (a) one or more governmental entities forgo tax revenues that [an individual] taxpayer otherwise would have been obligated to pay and (b) the taxpayer promises to take a specific action that contributes to economic development or otherwise benefits the government(s) or its citizens.” This would appear to also cover state corporate income tax credits and state or local sales tax exemptions, but apparently not tax increment financing.”
Note that in the race to the bottom between states, tax rates don’t stop at zero, but just keep going down. Pile the non-tax subsidies on that, and the overall equation can become very alarming.