January 5, 2017

There’s nothing to like about state giveaways to Facebook

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The irony that this post will be shared on Facebook isn’t missed on me, but hear me out:

Arguably the most important responsibility government has to its constituents is providing equitable opportunity for self-sufficiency. Meaning that it is the duty of those in charge to ensure that everyone has the tools they need to be highly productive individuals who can work collectively towards a single goal: to create prosperous, thriving communities. Giving unneeded tax incentives to one of the most profitable companies in the world does little to attain that shared goal. New Mexico needs to start investing in us.

Raphael Pacheco is a Policy and Research Analyst and State Priorities Partnership Fellow at New Mexico Voices for Children.

Raphael Pacheco, MBA

Raphael Pacheco, MBA

Every state in the country provides tax incentives to corporations for economic development but public leaders rarely scrutinize the return of this investment to their community. Cutting taxes in order to lure a big business (that would rather be in Utah, for example) is simply a race-to-the-bottom strategy that foolishly limits opportunity for those who need it most. Since the Great Recession, New Mexico college students have experienced a 46 percent increase in tuition. Choosing to cut higher education during the 2016 special session in the face of sustained tuition hikes demonstrates where government priorities currently lie. Giving away everything to Facebook—including the proverbial kitchen sink (turns out data centers need a lot of water)—is frustrating for a few reasons:

 

  • Tax incentives play an insignificant role in a company’s decision to expand or locate. The most important factor for corporations when considering new data center investments is the price of energy and operating expenses. facebook-blog-graphicNot taxes. Only 3 percent of corporations that own data centers list tax credits and local incentives as the biggest factor in that determination. The reason being that state and local taxes, as a share of total business costs, play too small a role in location decisions. Businesses want educated workforces, quality health care, and robust infrastructure; all three are crucial components of healthy, thriving communities. Ironically New Mexico will have less money available to provide these things thanks to the largesse to Facebook in the form of waived property taxes for 30 years and more than $13 million in Local Economic Development Act (LEDA) and Job Training Incentive Program (JTIP) funding.
  • Continued deep spending cuts during the recent legislative special session sends the wrong message and demonstrates misguided priorities. New Mexicans simply are not given the opportunity they deserve to acquire the skills needed for these permanent positions Facebook promises to bring with it. New legislation signed into law as a result of the special session eliminated $68 million in funding for K-12 education and cut higher education by 5 percent, which included taking $5 million from the College Affordability Fund and nearly 5 percent from the Student Financial Aid Program. Facebook is only bringing 50 permanent jobs to the state but it is unlikely many of these jobs will go to the community members of Los Lunas and the surrounding area. And given the deep funding cuts to our colleges and universities, our youth will find it harder and harder to get the education they need to compete for these or any other high-tech jobs. The construction industry will reap the benefits during the building of the campus, enjoying the creation of hundreds of temporary construction jobs, but any beneficial economic impact brought by Facebook is indeed only that: temporary. The way for New Mexico to have sustainable economic success is to expand access to high quality education, not by giving wealthy corporations tax breaks.
  • Special deals for Facebook only lower the bar for other companies looking to expand here. You don’t have to have an MBA to know that other businesses that are interested in expanding to New Mexico will expect to get the same deal Facebook got in their incentive package. Companies that might decide to locate to New Mexico will exploit New Mexican taxpayers even further, aggravating this dangerous race-to-the-bottom strategy adopted by state leaders.

 

I do not mean to villainize Facebook in this post. But I argue that the state’s current strategy for sustainable, long-term economic security is flawed and misdirected. Yes, we can all agree that Facebook is pretty cool. But do you want to know what is really going to attract companies with clout? Targeted, responsible investments in us like:

  • Increasing higher education funding;
  • Raising the statewide minimum wage and indexing it to inflation;
  • Increasing the Working Families Tax Credit;
  • Ensuring that all workers can earn at least one week of paid sick leave;
  • Expanding access to high school equivalency, adult basic education, job training, and career pathways programs; and
  • Increasing opportunity for economic development through expanded broadband access to rural New Mexico.

It is time for New Mexico to give businesses what they really need. Investments in our workforce (and by extension, our consumers), provide a better incentive for attracting businesses for long-term success and sustainability than do tax breaks. Investing in what New Mexicans need is the same as investing in what corporations need.

Correction: The byline on this piece originally said “Paul Pacheco” instead of “Rafael Pacheco.” We regret the error.

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