The elusive cost of job creation
How much is a job worth in New Mexico? In fiscal year 2011 (July 1, 2010 through June 30, 2011) New Mexico taxpayers paid out $91.3 million in job subsidies for three “job creation” programs. Was it worth it? Unfortunately, we don’t know because very little information is available to citizens. In this age of technology, information ought to be available at the click of a mouse. Democratic governance values like openness and transparency ought to guide public officials in making such information available, especially during times when resources to fund basic services are so scarce. Without information to evaluate the cost of a job subsidy, we can’t properly weigh competing needs when setting priorities for public spending. Make no mistake about it, job subsidies are just as much items of spending as is money provided to state agencies for services.
However, as a recent report shows, job subsidies don’t usually get the same scrutiny as the direct spending side of the budget. Published by Good Jobs First in January 2014, the report Show Us the Subsidized Jobs shows that New Mexico has almost no information on job subsidies to evaluate whether they work. Out of 500 possible points, New Mexico scored only 34, which earned us a ranking of 38th in the nation. Most other states have been more forthcoming about job subsidies. States such as Illinois, Michigan, North Carolina, and even Texas, have enacted legislation or taken administrative steps to provide the public with information needed to evaluate tax breaks or job subsidies.
In the report, the authors examined the online availability of economic development subsidy awards and outcomes. For New Mexico, the authors examined five job subsidy programs: (1) the film tax credit, (2) the high wage tax credit, (3) the Job Training Incentive Program (JTIP), (4) the manufacturer’s investment tax credit, and (5) the technology jobs tax credit. All of our 34 points were earned by one program—JTIP—while all of the other job subsidy programs got zip.
In the wake of the Great Recession state policy makers have spent lots of time talking about ways to add jobs and revive New Mexico’s stagnant economy. One policy initiative pushed by Governor Martinez and passed by the Legislature in 2013 was a cut in corporate income taxes (CIT). This was done in the hope that it would result in something good. Whether or not this tax cut will prove to be effective in adding jobs is very much unknown. Unfortunately, just as for the job subsidy programs, there is no mechanism to measure how many jobs, what type or where they might be added as a result of the corporate tax cut, so attributing new jobs to the tax cut with any certainty will be impossible.
In order to know if these tax cuts and job subsidies work, we need to track their costs and evaluate their effects. We also need to do a much better job of giving the public information on these programs. An important first step would be the production of a complete tax expenditure budget, not one based on political calculation. The second step should be providing this information online in a format that is clear and concise.
James Jimenez is Director of Research, Policy and Advocacy Integration at NM Voices for Children. Reach him at firstname.lastname@example.org.