Nebraska: No evidence incentives work

by JoAnne Young, Lincoln Star-News, August 30, 2013.

The Legislature's Tax Modernization Committee is preparing to tour the state and hear what Nebraskans have to say about potential changes to p… Read more

Senators from two legislative committees gathered at the Capitol on Friday seeking answers on whether tax breaks given to businesses to locate or expand in Nebraska are benefiting the state.

Many questions remained unanswered: Are programs such as the Nebraska Advantage Act working? If not, how much would it cost to make them work? And are businesses without tax breaks having greater growth than those with incentives?

Tax Commissioner Doug Ewald told the group he only could offer limited information in the report.

"I'm not here to give an opinion on what works or doesn't work," he said. "If you have a policy question with respect to incentives, that's really kind of up to the Legislature to determine (if we are) investing the right amount of money in these types of programs."

What senators learned is that the state signed agreements in 2012 under the Nebraska Advantage Act with 58 companies, with a planned employment of slightly more than 2,100. Forty-five of those companies actually qualified for the program.

The Journal Star Printing Co. and its parent company, Lee Enterprises, have been recipients of tax credits under Nebraska state law.

The total tax credits used and refunds approved in 2011 and 2012 were $24.7 million. Tax credits earned but not yet used totaled $209.5 million for that year.

Since 2006, the increase in new full-time jobs at the qualifying businesses is 7,103. The companies have invested $3.5 billion in the state.

"Would those jobs have come to Nebraska if we did not have some kind of investment credit system?" said Revenue Committee Chairman Galen Hadley. "Do we roll the dice and say, OK, no more, we don't have to do this. Let's just hope we get $3.5 billion from companies willing to come just because they like us."

Every state in the nation is wrestling with this problem, he said. And it would be great if those states that have them could be convinced to get out of the tax incentive business and attract businesses, instead, with assets such as work force.

Sen. Paul Schumacher of Columbus asked Ewald if a better model for attracting businesses would be reducing sales taxes on business inputs or reducing corporate income tax, for example.

"I know there's simpler approaches, there has to be," Ewald said. "We have a lot of overhead in the department. Companies have a lot of overhead to track and maintain something like this. ... It's not easy."

Sen. John Harms of Scottsbluff said the committees and the Legislature have their work cut out for them to examine and decide what the state should do and then put it into law.

"The idea here is to keep our economy strong," Harms said.