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Unlike other states, Utah doesn't reveal whether companies offered tax breaks meet their goals

Published July 10, 2017 9:59 pm

Economic development • Utah officials say their hands are tied in not disclosing job-creation numbers.
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The public will likely never know the impact of a $5.6 state million tax incentive offered to Amazon.com Inc., because unlike other states, Utah keeps the results secret.

Each year of the eight-year agreement, Amazon will set a benchmark for how many jobs it plans to create. It has committed to hiring 130 people at wages 10 percent above Salt Lake County's annual average of $49,449.

At the end of the year, Amazon must prove to the Governor's Office of Economic Development (GOED) that it met the mark. If the company falls short, it cannot claim the rebate on payroll, corporate and sales taxes.



But state officials said they cannot publicly share the benchmarks, or disclose whether Amazon hits its targets, or reveal the amount of tax dollars it collects out of the millions Utah is offering in rebates. In essence, GOED is telling taxpayers, "Trust us."

"They tell us how many jobs they're going to create in 2017 and they project that out, but we don't share that publicly," Ben Hart, deputy director of GOED, told The Salt Lake Tribune when the deal was announced. "The Tax Commission and the Department of Workforce Services have very, very strict confidentiality requirements, federally imposed confidentiality requirements."

Utah does not have a specific tax statute that regulates disclosures about incentives, according to Charlie Roberts, public information officer at Utah Tax Commission. GOED's policy on disclosures therefore falls under the general state law that prohibits the commission from sharing any information on a tax return.

That argument is overly broad, according to Greg LaRoy, executive director at Good Jobs First, a national policy resource center that tracks government subsidies for economic development.

"This idea that Amazon has some right to hide how the deal is doing for eight years is balderdash; it's nonsense," LaRoy said. "There's no proprietary business claim. You're not hiding the content of a patent or formula or a web application or software code."

Only a handful of states make the argument that because the value of the incentive is included on a tax form, it is protected by taxpayer privacy rules, LaRoy said.

"Lots of states do disclose outcomes," LaRoy said. "It's absolutely right that states should disclose not just the awarding of deals, but the outcome of deals over time."

Take Florida. Tax law in the Sunshine State includes a provision that allows the state to disclose the number of jobs created, the amount of tax incentives paid out and the annual wages of workers related to the incentive. The state displays the data in an online portal.

And even where state law prohibits disclosures of private tax information, some states still find a way to be transparent. Connecticut discloses the amount of tax credits a company qualifies for based on its annual performance. However, it does not disclose if that company claimed those credits on its return. That strategy maintains the firm's privacy while keeping details of the incentive deal public.

"One of our responsibilities is to the taxpayer of Connecticut, and we need to be transparent where we can," said David Treadwell, a spokesperson for the Connecticut Department of Economic and Community Development.

If Utah disclosed job-creation numbers, state officials said, it would hurt firms receiving incentives. "It would put them at a competitive disadvantage if their competitors knew their growth," said Thomas Wadsworth, director of corporate growth and business development at GOED.

But the Department of Workforce Services maintains a public portal that shows the number of employees at every company, updated twice a year. Anyone could visit this page every few months to track a business' growth. The department's Nate McDonald pointed out, however, that the agency cannot tell from that data whether new job creation is related to any incentive program.

Connor Boyack, head of the nonprofit Libertas Institute, called for GOED to prove to taxpayers that incentives are effective.

"They make claims about creating jobs in order to justify what they do, but then don't release enough detail to prove to the public that things are what they claim," Boyack said. "It really suggests there are some potential problems in this system that are in dire need of reform."

Libertas successfully fought the Utah Tax Commission for release of the boilerplate contract between the state and Amazon that triggered the retailer's voluntary collection of state sales taxes beginning Jan. 1.

In 2014, the Utah State Auditor found that GOED had inflated the quality of jobs created by its $600 million incentive program. According to the audit, the economic development agency's staff had counted existing employees as new employees, removed low-paying jobs from an average wage calculation and retroactively changed the wage criteria of an agreement so that a company could receive an incentive without merit.

"Each of these adjustments generated an inequitable and inconsistently applied assessment of company job creation and wages," the audit found. "Additionally, such adjustments create the false perception that GOED incents jobs that pay more than they actually pay."

As a result, the Utah Legislature passed a law in 2015 to strengthen the definition of "high-paying jobs" GOED must use in its deals.

Earlier this year, lawmakers also authorized a new Economic Development Legislative Liaison Committee, that will for the first time allow legislators to see the details of GOED's incentives.

"Transparency in government is what creates faith in the governed," said Rep. Dan McCay, R-Riverton, who sponsored the bill that created the committee. "It gives the people the peace of mind, I believe, that their government is being run the way they want it to be run."

But legislators on the committee are prohibited from sharing that information with the public. A lawmaker could be charged with a class B misdemeanor if he or she disclosed confidential information discussed in the committee. Such a crime carries a possible six-month jail sentence.

Still, McCay said the committee is a step in the right direction and that he would like the government to be more transparent with the specifics of incentive deals.

 

 

 

 

 

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