Let’s save taxpayer dollars and improve the state’s economy by suspending corporate welfare in Delaware.
This time last year, we celebrated the news that spin-offs from the Dow-DuPont merger would stay in Delaware. It cost taxpayers $17 million in corporate subsidies to secure the win over Iowa and Indiana.
On its own, $17 million may not seem like an unworthy investment to retain a portion of a legacy company. However, the deal cost more.
We also reformed the state’s corporate tax code — a move that would benefit Dow-DuPont and apparently make Delaware more attractive to other R&D companies, costing an additional $48.7 million over three years.
If this still sounds like a good deal, consider that Dow-DuPont reported a profit of $6 billion the year before and promised no new jobs in exchange for these handouts. It makes you wonder how much welfare they really need.
Now, fast-forward to today when state lawmakers are grappling with how to address a $350 million budget gap. Talk of cutting spending and raising taxes on individuals is just the beginning. Just about everything, including education funding, is on the chopping block, except for rolling back last year’s corporate tax cuts or eliminating corporate subsidies.
Although Delaware spends among the least of all states on corporate subsidies, spending only produced job growth of 2.76 percent between 2005-2015. Other low-spending states averaged job growth of 6.18 percent over the same 10-year period.
A 2016 study by the Center for Budget and Policy Priorities found that out-of-state firms account for only 1-4 percent of annual job creation, compared to homegrown firms that account for 80 percent of annual job creation. Indeed, startups and young, fast-growing firms were found to represent about 70 percent of all new jobs in the U.S. economy.
This is in line with what we know about small business. They created 7 out of 10 new jobs! These are the real job creators.
When we divert scarce resources to big corporations, we give away taxpayer dollars that could have been better spent on education, transportation and public safety. Additionally, because startups and young, fast-growing firms seldom have abundant taxable income, corporate tax cuts are of little value to them. What they value most is access to talent, capital and markets.
In the spirit of budget-cutting, it’s time Delaware slash corporate subsidies and special tax breaks, and instead, pursue economic development from a bottom-up approach that’s proven to create jobs faster.
Delaware simply cannot afford to give out corporate handouts right now.