New Report Shows Kentucky’s Economic Performance Falls Short

Dec 10, 2018

Credit Flickr/Creative Commons/401kcalculator.org

A new report says one-third of the more than $9 billion in announced investments for Kentucky last year wasn’t attached to any new jobs. The Kentucky Cabinet for Economic Development said the state gave away more than $361 million in tax incentives in 2017.  

According to the report from the left-leaning Kentucky Center for Economic Policy, the state no longer releases a report listing facilities that closed in the state, making it difficult to determine how many net new jobs were created.

The report identified 1,209 jobs associated with Toyota’s $1.33 billion investment in 2017. But multiple news stories indicate no new jobs were connected to this investment, and the state’s Cabinet for economic development granted $43.5 million in tax breaks for the project.

That tax subsidy is for job retention, not job creation. The agreement actually allows Toyota to eliminate 788 jobs and still qualify for the tax breaks. There are also no new jobs from Ford’s $900 million investment, only the retention of jobs.

According to Federal Worker Adjustment Retraining Notification Act filings, the commonwealth has lost 3,721 jobs so far this year. KCEP Executive Director Jason Bailey said the state isn’t doing enough to invest in the fundamentals of the economy.

“What they need is a strong education system, a good quality of life, a modern infrastructure including broadband internet access,” he told WKU Public Radio. “That’s what is going to help get a new businesses started.”

 

Bailey said the state has instead focused on offering tax breaks for corporations and wealthy individuals, reducing the amount of revenue the state has to invest in things like infrastructure and the education system.

The study says more than 80 percent of the jobs created in a state in any given year are from new business start-ups and expansions of existing companies already located in the state. About 82 percent of the announced investments in Kentucky last year were from businesses already operating in Kentucky, and many of those facilities received tax breaks. Bailey questioned the amount of money the state gives away in tax incentives.

 

“We have also just done very little to scrutinize what we give away in tax breaks,” he said. “A lot of information is not collected from companies that get tax breaks and a lot is not reported publicly.”

 

Only a couple of studies have taken a look at Kentucky’s tax subsidies. In 2007 the Center for Business and Economic Research estimated that these programs cost $26,775 per associated job. A report by Anderson Economic Group in 2012 found that 35 percent of the jobs associated with tax incentives would have to be created solely as a result of the state’s tax breaks - and not other factors - in order for them to be cost effective.