Vermont disagrees with Pew study of business development incentives
The state of Vermont is calliing into question a national review of state business development tax incentives. Vermont, according to a report released Wednesday by the Pew Center on the States, is one of several states that is not looking hard enough at the results of tax incentives used for economic development. Vermont is among half the states "trailing behind" in its review of these incentive policies. However, that study did not include Vermont's principal incentive program.
The Vermont Agency of Commerce issued a statement Friday saying that while it appreciates the work done by the Pew Center for the States, including their recently released report, “Evidence Counts,” an evaluation of State tax incentives for jobs and growth, it is missing a key element in its evaluation of Vermont.
The Pew report did not include Vermont’s current and active business incentive program, the Vermont Employment Growth Incentive (VEGI) program. According to Josh Goodman of the Pew Center on the States, “While [the Center] was intrigued by the design of VEGI (and, in particular, your approach to "but for"), we concluded that VEGI is a cash incentive, rather than a tax incentive--it does not reduce companies' tax liabilities. Therefore, we didn't include the VEGI evaluation in our rating for Vermont.”
Pew cited the Vermont Economic Advancement Tax Incentive program, which ran through 2006. SEE APPENDIX D for all sources used by Pew.
The Pew rating in the report does not include the many evaluations that have been done by the State of Vermont and others of the VEGI program because the program did not fit the profile of the programs Pew was evaluating, according to the Vermont statement sent by Deputy Secretary Pat Moulton Powden. Therefore, the Agency determined, it is incorrect to assign their rating to the current business incentive program.
In fact, VEGI is one of the most studied state programs in existence, undergoing an audit every other year, several studies by Legislative committees, and most recently, a comprehensive evaluation by the Secretary of Commerce. The program was also recently rated among the top incentive programs in the country by Good Jobs First, a Washington, DC-based national policy resource center for grassroots groups and public officials, promoting corporate and government accountability in economic development.
The Pew report said policy makers across the country spend billions of dollars annually on tax incentives for economic development. But no state ensures that policy makers rely on good evidence about whether these investments deliver a strong return, the Pew study concludes. Often, states that have conducted rigorous evaluations of some incentives virtually ignore others or assess them infrequently. Other states regularly examine these investments, but not thoroughly enough. The Pew study did not say exactly what incentives it did look at if it was not looking at the VEGI program.
Pew said the use of these investments appears to have grown substantially. Today, every state has at least one tax incentive program, and most have at least several. Tax incentives are policy choices with significant implications, especially at a time when most states are trying to rebuild their budgets and many have not regained the private-sector jobs lost during the Great Recession. If states do not base decisions on evidence, they could have less money to spend on other critical services. By not using effective incentives, states could miss opportunities to create jobs and support businesses.
A report by the Pew Center on the States concludes that 13 states are leading the way in generating much-needed answers about tax incentives’ effectiveness. Twelve states have mixed results. Half the states have not taken the basic steps needed to know whether their incentives are effective. The study highlights a wealth of promising approaches states have taken to help lawmakers find those answers.
PEW April 12, 2012