Relating To An Interstate Compact To Phase Out Corporate Welfare.
The enactment of this compact would fundamentally alter the landscape of economic incentives offered by states to corporations. By collectively agreeing to phase out corporate welfare, member states would be addressing the inefficiencies associated with competitive subsidies that distort the market. The effect would likely be a reduction in the number of specific tax benefits or grants offered, allowing businesses to operate based on merit and overall business conditions rather than the size of subsidies. Existing company-specific grants would not be affected unless their terms were changed, which would then be deemed as new grants under the compact's provisions.
House Bill 462, titled the Interstate Compact to Phase Out Corporate Welfare, proposes a collaborative approach among the states to eliminate company-specific subsidies that create inequalities in economic development. The bill establishes a framework for any U.S. state and the District of Columbia to join the compact by enacting it into law. One of the main objectives is to create a level playing field for all employers by refraining from offering specific tax incentives and grants to companies, particularly those located in other member states. This legislative effort is grounded in the belief that corporate welfare is one of the least effective uses of taxpayer dollars, propelling a race to the bottom where local and state governments feel compelled to subsidize corporations to attract or retain them within their borders.
The bill recognizes the challenges faced by local and state governments, referred to as a 'prisoner's dilemma,' where individual governments are disincentivized from stopping corporate welfare due to fears of losing companies to other states offering better incentives. Opponents of corporate welfare argue that it not only fuels inequality among businesses but does not effectively achieve economic growth. While supportive voices from various states emphasize the need for a collective strategy to eliminate this form of welfare, opponents may express concern about the potential impacts on local job creation and economic dynamism.
Key features of the compact include provisions that will establish a national board to oversee the compact, ensuring that member states work collaboratively on phasing out corporate welfare. This board will gather input from various stakeholders and publish recommendations for revisions to the compact annually. Additionally, the compact allows room for member states to withdraw after six months' notice if they choose to do so.