Utah could help create an agreement that would prevent states from poaching companies from each other through tax incentives under a new bill in the state legislature.
Utah is one of 13 states considering bills to create such an interstate compact, which would only become valid if all 50 states sign on and it’s approved by Congress. Five states took up similar legislation last year, but none of those bills passed.
“We’re just in the beginning steps of getting this done,” said Rep. Marc Roberts, R-Salem, sponsor of Utah’s bill.
The multi-state, bipartisan effort, dubbed the Coalition to Phase out Corporate Tax Giveaways, sprung up after the tax incentives bidding war when states vied for Amazon’s second headquarters. That bidding war ended with Virginia giving the company nearly $600 million in subsidies.
“When you have companies shopping states and trying to get out the most incentives out of each state, we end up cannibalizing each other, and it's a race to the bottom,” Roberts said.
A study from George Washington University found tax incentives are ineffective at growing companies and creating more jobs.
“Incentives have little impact on the relocation or expansion decisions of firms,” the study reads.
However, the Utah Governor’s Office of Economic Development reported almost 11,000 new high paying jobs in companies receiving Economic Development Tax Increment Financing, the tax credit used to bring new businesses to Utah.
According to Benjamin Hart, GOED’s deputy director, companies seeking that tax credit are required to sign a legal contract stating that without the incentive, they would not have come to the state.
“When we know that the company's coming here anyway, we don't provide an incentive — we withdraw,” Hart said. “We've told some very big companies … that they’re not going to get incentives because we feel like it’s not competitive.”
Utah House Speaker Brad Wilson has not yet taken a position on the bill, but said it’s a long overdue conversation.
“We’re all racing to keep up with the next person, the next state, and I’m not sure this is the best policy for the country,” Wilson said.