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.
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.
Photo by Ken Teegardin.