Governments often make deals with private companies, offering generous subsidies to encourage development in their respective states. The year 2023 was unfortunately no exception.
According to a new report from Good Jobs First, a watchdog group that tracks economic development deals, 16 states promised more than $10 billion to private companies last year. The group counted 23 “megadeals,” which it defines as any agreement involving at least $50 million in subsidies to a private company.
The most spendthrift state was Michigan, which agreed to shell out $2.73 billion for three projects, including $1.7 billion to Ford Motor Company, the single largest economic development deal in the nation last year. The Center for Economic Accountability, a Michigan-based think tank that opposes corporate welfare, previously named the Ford subsidy 2023’s Worst Economic Development Deal of the Year.
Economic development subsidies are often sold with the promise that the state will recoup its initial investment in the form of greater tax revenues, as the development projects spur economic growth. Michigan Gov. Gretchen Whitmer pledged that the Ford project “has an employment multiplier of 4.38, which means that an additional 4.38 jobs in Michigan’s economy are anticipated to be created for every new direct job.” A multiplier of 4.38 would be extraordinarily high, and a much more realistic number would be closer to 1.5 or 2.
When broken down by the number of jobs the subsidies are supposed to directly create, the math is still unfavorable. Michigan’s $1.7 billion investment, intended to “create 2,500 good-paying jobs,” works out to a staggering $680,000 per job, for which state taxpayers would be on the hook. (Ford has since announced it would be “re-timing and resizing some investments,” which included paring back its project in Michigan and lowering its job creation goal to 1,700).
Good Jobs First noted in its report that 18 of the deals announced last year included “job creation targets,” for a total of 34,928 jobs promised. When compared against the amount of state funding promised in return, though, that works out to an average subsidy of $262,800 per job.
Among the other most egregious examples on the list, Amazon received property tax exemptions worth $1 billion over 15 years for its Oregon data centers. At the time, Good Jobs First noted that Amazon—which recorded $4.3 billion in profits and $524.9 billion in revenue last year—”hasn’t said how many jobs it will create, but the program under [which] the tax breaks were approved requires just 10 jobs per project.”
If there is an upside, the report notes that 2023 actually saw fewer “megadeals” than the year before. “Whereas we dubbed 2022 a ‘mega-year’ for megadeals,” writes Good Jobs First research analyst Nya Anthony, “the decreasing costs and number of deals in 2023 suggest a cooling-off period for state and local subsidy decision-makers this year.” Unfortunately, Anthony still foresees that the automotive and tech industries “will most likely be heavily subsidized next year.”