Practical arguments can be made for using incentives to recruit and retain businesses. That’s why Nebraska adopted LB 755, the Employment and Investment Growth Act, in 1987 and approved its successor law, the Nebraska Advantage Act, in 2005.
A new report from the Legislative Performance Audit Committee points to a major shortcoming in Nebraska’s approach: The state has inadequate mechanisms in place to measure how the benefits from economic incentives compare with the costs.
That’s a disservice to Nebraska taxpayers. State Sen. John Harms of Scottsbluff, who chairs the committee that issued the new report, is right when he says, “We need measurable benchmarks so we can say to the public and taxpayers, yes, it is worth the dollars we’re spending.”
Harms’ committee looked at the incentives policies of nine states, including all those that border Nebraska. It found that six of the nine have formal evaluation processes for measuring the effectiveness of their business incentives.
From 2006 through 2012, the Nebraska Advantage Act provided $130 million in tax credits and refunds to companies that created 7,100 full-time equivalent jobs and invested $3.5 billion. That translated into about $18,300 in tax breaks per job.
A state commission is now studying Nebraska’s overall tax policy and will make recommendations for the 2014 legislative session. The commission’s tax reform package should include some type of evaluation process for business incentives.
Economic incentives make sense for Nebraska, but so does having a way to judge whether they justify the cost in the specific instances.