Members of the Joint Legislative Study Commission on Economic Development Incentives recommended at a meeting Monday that the Legislature consider increasing the $350 million cap on Alabama Jobs Act economic development incentives and extending the law's sunset date for another five years until July 30, 2028.
Economic development incentives range from tax breaks or direct cash assistance offered by state and local governments designed to keep or draw businesses into the area. The scope and amount of assistance differ from state to state.
The Alabama Jobs Act offers various tax credits and abatements to qualifying new and existing businesses in Alabama. The law is scheduled to end on July 31, 2023, unless an extension is passed in the upcoming legislative session in 2023.
Alabama Lieutenant Gov. Will Ainsworth, the committee’s chair, said at the meeting that the amount the Alabama Jobs Act cap will be increased is “going to be up to the Legislature to decide.”
“We recommended increasing the cap, and then that would be to be determined by the executive and legislative leadership, so we’re not putting an amount on that,” Ainsworth said. “It’s just currently the recommendation from the commission, when we looked at that, was that we’re bumping up against [the cap], so there’s a lot of stuff we’re not able to get involved in. We didn’t put an amount on there.”
Shortly after the meeting concluded, Senate President Pro Tempore Greg Reed (R-Jasper), incoming Speaker of the House Representative Nathaniel Ledbetter (R-Rainsville) and Senate Minority Leader Bobby Singleton (D-Greensboro) put out statements agreeing with the commission’s recommendations.
“Growing Alabama’s economy and creating good jobs for our citizens is something we can all agree on,” Singleton said in a statement. “This commission has been thorough in studying existing incentives and exploring how they can be improved and further deployed to really capture their full potential. I thank this commission for its diligent work and look forward to seeing the impact its findings will have on communities across our state.”
Reed said for Alabama to be able to compete with neighboring states, economic development incentives need to be reauthorized and expanded.
“When you look at the top issues Alabamians care about, economic development and job creation are right at the top of that list,” Reed said. “States around our region are all competing with each other to attract jobs and to create economic growth, and we need to make sure that we win those competitions so good-quality jobs will come to our state and our communities. Alabama is the greatest state in the nation to live and work, and these incentives will play a key role in keeping it that way.”
The commission also recommended increasing transparency around Jobs Act incentives and that “information on receipts of Jobs Act incentives should be publicly available on a rolling basis after a final project agreement has been executed between the state and a private company.”
Dr. Dan Sutter, Professor of Economics at Troy University, said in an interview with 1819 News on Monday that improving transparency is a “crucial issue” with regard to economic development incentives. “If you’re generating all these benefits, then let’s share all the information,” he said. “... Let’s be completely transparent and let independent, outside researchers get access to records so we’ll be able to see if we can actually verify some of these statements” about the benefits.
Sutter said it’s possible incentives are “not great policy,” but the “kind of thing you want to continue with given that other states are doing it.”
Sutter told 1819 News, "[I]f politicians think that our taxes on businesses are too high to get businesses to locate here without giving them a tax break, well maybe what we should do is lower tax rates overall for all businesses and not just the ones that they want to select to give a tax cut to.”
“When economists try to measure how much these incentives matter, one of the things is that it’s actually kind of difficult for the economists who study this very carefully to find a lot of evidence that the tax incentives are actually crucial in getting businesses to relocate,” Sutter said. “That becomes really important when you say, ‘Would these incentives pay for themselves?' Part of the question would be if the business was going to locate here without these tax breaks, then you can’t actually say the tax breaks were necessary to get the business to locate here, relocate here, or stay here. You’re giving away something you didn’t have to give away possibly. The economic research has struggled to find any systematic evidence that these development incentive deals really change businesses location decisions.”
Members of the commission had previously floated the idea of completely eliminating the Jobs Act incentives cap, but that wasn’t met with much enthusiasm from some state lawmakers.
To connect with the author of this story, or to comment, email caleb.taylor@1819News.com.
Don't miss out! Subscribe to our newsletter and get our top stories every weekday morning.
