Officials defend secrecy on business subsidies

If he is so confident that the incentive programs have been successful, why not share that information with the public?

“There are a lot of businesses that don’t want that information out there,” he said, “so it would be counterproductive if they said, ‘Maybe Alabama isn’t so business-friendly after all.’”

South Carolina State Representative William E. Sandifer III, a Republican who chairs the House Labor, Commerce and Industry Committee, agreed. “As a businessman, I understand that businesses want their competitors to have as little information as possible.”

Many legal scholars and economists do not give credence to the argument that disclosure of incentives at a firm-specific level would affect a state’s competitiveness. Robert Lynch, a professor of economics at Washington College in Maryland, argued that several states do disclose the recipients of tax credits and other subsidy programs, and there is no evidence that those disclosures have affected the propensity of businesses to take those subsidies.

Richard D. Pomp, a law professor at the University of Connecticut who specializes in state tax policy, said that, regarding publicly traded corporations, so much information about a company’s financial position is already available that state-level information on incentives would make little difference. “The claim that corporations have a right to privacy or that it would hurt their competitiveness is very much called into question by the amount of information we already require them to disclose,” he said.

Regarding companies that are not publicly traded, Pomp added that it was possible to craft disclosure requirements so that companies would not have to reveal potentially sensitive information about their finances. “A lot of states have already done it,” he said. “There has never been a case that I know of where a competing business found something that gave them a real edge from disclosures on incentives.”

“I just want to know what I’m voting on”

Even in Alabama, there have been some efforts to improve transparency. In 2010, Democratic State Representative Patricia Todd introduced a bill that would have required the Department of Revenue to report the recipients of all of the state’s many incentives. The proposed bill died in a now-defunct House committee. Todd said that she is now planning to introduce a bill that would require the state to submit detailed information on proposed incentive legislation, including a cost-benefit analysis, before lawmakers would be allowed to vote on it.

“I just want to know what I’m voting on,” Todd said. “I’m not opposed to incentives, necessarily, but I can think of a lot of other ways to use that money in my district if it turns out they aren’t working.”

During this year’s legislative session, the first 10 bills that came up for a vote in Alabama were related to economic development and tax incentives, and most of them passed. “Some of those bills were so vague that we didn’t know what we were passing,” she said.

But she has seen little interest from her fellow legislators. “I feel like the lone voice in the wilderness, the only person saying, ‘You all are supposed to be Republicans, complaining about fiscal responsibility, so stop asking me to write blank checks.’”

A one sided deal?

Another argument against disclosure that is made by some lawmakers is that tax credits and incentives are not limited to businesses, but also exist for individuals as well. “We would never ask governments to disclose the names of individuals getting credits,” Lake said, “so why would we do it for businesses?”

Philip Mattera, the research director of Good Jobs First, responded that there is a crucial difference between the two: “These incentives are being offered to businesses with the expectation that they’re going to do something specific with them,” he said. “When a company takes a credit, they are entering into an explicit or implicit agreement with the government to create or retain jobs or increase their investment.”

If companies do not want the amount of their subsidies disclosed, Mattera said, then they have the option of not entering into that agreement. “If they don’t want that information out there, then obviously the answer is for them not to take the subsidies, not just to keep the whole thing secret.”

Phineas Baxandall, a senior tax and budget policy analyst for the United States Public Interest Research Group (U.S. PIRG) who has studied state and local incentive disclosure, agreed. “If we don’t have that information, then there’s no way of knowing whether companies are holding up their end of the bargain,” he said. If the claim is that there is no “bargain” for companies to stick to, Baxandall went on, “then that means we’re just giving out money for nothing.”

“I don’t think there are many people that think that’s a good way to make policy,” Baxandall said.