More corporate welfare: job-retention tax credit expanded

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Before it’s enacted, we’ll highlight one last atrocity in the Governor’s budget no one has really mentioned and that is the expansion of the Job Retention Tax Credit (item: TAXCD6 in the comparison document).

If you remember the Governor’s big “jobs” announcements so far, you’ll recall that the state is awarding tons of money to Diebold, American Greetings and Bob Evans to keep them from leaving Ohio. These aren’t new jobs being created, just old ones retained by companies who had to first kick and scream and threaten to leave (sometimes with no offer letter from another state). This is where the JRTC (pronounced “jertsee” by dorks in the know) comes in.

You’d think just giving away money every time a company threatens to leave would be bad policy, and you’d be right. So the credit has been designed with some pretty stiff requirements: make a major investment in expanding your facility and keeping Ohioans employed at good wages and only then are you eligible for the tax credit. Unfortunately, the Governor’s proposal drops job retention thresholds (in a “job retention” tax credit?!), preventing the Development Department from setting specified job retention goals in the agreement. All it can require is the employer keep 500 jobs in Ohio, regardless of how many they had at the time the credit was awarded.

The proposal also lowers to $5 million the amount of investment that must be made in a facility expansion for an employer to be eligible. Formerly, a manufacturer had to invest $50 million in an expansion, or $20 million for a corporate headquarters. So, with the Governor’s changes, now Bob Evans could start with 2,000 employees and a payroll of $50 million, promise to add a $5 million executive cafeteria to its headquarters, and later lay off 1,500 of those employees. Then, as long as their total payroll continues to be above $25 million, they would get the tax break.

The Governor has also given himself a bigger checkbook – where he used to be limited to handing out $8 million in credits annually, that number is now $25 million in the budget as a result of this budget. So it’s costs $17 million a year, but we have less of a guarantee that the company is making significant investments and retaining jobs.

Lastly, the Governor’s budget also makes the JRTC refundable. What this means is, if Diebold gets the tax credit but ends up thanks to accounting tricks owing no taxes to Ohio, then Ohio will write them a check. Nope, I’m not lying. The Tax Department has long opposed refundable tax credits, but with this budget, the Kasich administration has come in and rammed a big one through.

Think no one made out well in this budget? Then you would be wrong. We are cutting schools and local governments to the bone so we can throw more money at CEOs and investment banks and it’s happening right under your nose.

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