AIB Hails New Requirement for Subsidy Transparency

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Photo: Accounting.Advocates for Independent Business (AIB) today hailed a newly issued accounting rule that will require local and state governments to annually disclose the amount of tax breaks they give to corporations in the name of economic development.

The rule change was proposed earlier this year by the Governmental Accounting Standards Board (GASB). In February, AIB submitted a public comment letter strongly supporting the proposal and urging the board to go further by mandating that governments not only report the aggregate amount they spend on corporate tax breaks, but also disclose the details of individual deals.

“This issue is of significant interest to our member organizations, because when cities and states use tax breaks, as they often do, to subsidize the growth of large companies like Walmart and Amazon, it directly affects the competitive landscape for independent businesses,” said Stacy Mitchell, coordinator of AIB. “We commend GASB for issuing this new rule, which will make the total cost of these tax breaks transparent for the first time and open the way for meaningful public debate about whether they are warranted.”

Cities and states currently spend an estimated $70 billion a year on tax breaks for economic development. Studies indicate that subsidizing big retailers does more harm to the local economy than good by causing job and revenue losses at competing small businesses.

In its comment letter, AIB urged GASB to make two changes to its proposed rule. The first was to clarify that the disclosure requirement covers all forms of tax breaks, including those distributed through tax increment financing. The final rule does make this clarification.

The second was to mandate that local governments disclose information on individual deals, including the name of the recipient company and the value of its tax break. The final rule does not include this requirement.

“While GASB’s new rule is a big step forward, we are disappointed that the board chose not to go further by requiring disclosure of individual deals. This is vital information if citizens and policymakers are to be able to fully evaluate the costs and benefits of these expenditures,” said Mitchell. “We hope GASB will move toward mandating this level of reporting in the future.”

Photo by Ken Teegardin.

3 Responses

  1. […] budgets. Earlier this year, ILSR joined with Good Jobs First and our small business allies in a successful campaign to require that states and cities annually disclose the total value of these deals. The reform will […]

  2. […] budgets. Earlier this year, ILSR joined with Good Jobs First and our small business allies in a successful campaign to require that states and cities annually disclose the total value of these deals. The reform will […]

  3. […] Victory on Disclosure of Corporate Subsidies Local and state governments will be obliged to tally and annually disclose tax breaks they give to corporations under new rules from the Governmental Accounting Standards Board. This is a win for both taxpayers and independent businesses that often are harmed by subsidies to their competitors, including large chains and online companies. […]