Many of the most important stories develop for years before they get covered because no one makes an official announcement, there is no central point where events occur, and the facts are scattered, subtle, and sometimes buried. Gene Roberts, the legendary executive editor of The Philadelphia Inquirer, often said these are stories that “ooze.”
In a widely applauded three-part series last month, The New York Times took a long, deep look at an important story that has oozed for decades: state and local subsidies to businesses.
Reporter Louise Story wrote in the first installment that the Times “analyzed more than 150,000 awards and created a searchable database of incentive spending.” The paper pegged the annual cost to taxpayers of the programs it identified at more than $80 billion, though it added that “the cost of the awards is certainly far higher.”
The series drew immediate and profuse praise. Neal Peirce, a state government specialist whose column is syndicated by The Washington Post Writers Group, called the series “a landmark in U.S. investigative journalism.” A column by Anna Codrea-Rado here at CJR stated that by augmenting the articles with an online database, Story “presided over the perfect marriage of big data and public service journalism.” And Matt Purdy, investigations editor at the Times, told me via email that the paper had “heard from scholars at the Federal Reserve and universities like Duke and Stanford who are grateful for the resource and plan to use Louise’s data in their research.”
I was among those who were thrilled to see so much front-page real estate devoted to a topic I had written about in my 2007 book on corporate subsidies, Free Lunch.
The series, on a vital but under-covered public issue, deserves much of this acclaim. The package compellingly portrays the power imbalance between corporations and local governments in negotiations over incentives, as well as the uncertain, and often unmeasured, benefits of these subsidies to the states and communities that bestow them.
But within days of publication the series also began to draw measured criticism not from the companies it exposed for taking taxpayer money, but from several of its own sources as well as noted authorities on the subsidy issues. These critiques—which amount to worries that the Times may have simultaneously understated and overstated the scale, and misstated the nature, of subsidies to business—were joined to praise for the effort. But with the Times package drawing mention in local coverage of these issues around the country, it is worth taking a closer look back at the criticisms now, because the series will continue to influence work by other news organizations—especially as state legislatures convene for a new year and budget debates move to the top of the news agenda.
Should sales tax exemptions count?
Perhaps the single largest critique focused on the Times’s choice to include sales tax exemptions for businesses in its accounting of subsidies. That decision was not a minor one. As Story wrote in the first article of the series, sales tax relief accounts for “around $52 billion of the overall $80 billion in incentives.”
correcting typo
David’s article says: sales tax relief accounts for “around $52 million of the overall $80 billion in incentives.”
Louise”s story actually says:
“The income tax breaks add up to $18 billion and sales tax relief around $52 BILLION of the overall $80 billion in incentives.“
#1 Posted by Bill Du Bois, CJR on Tue 29 Jan 2013 at 05:38 PM
Thanks, Bill. We will get that m turned into a b.
#2 Posted by David Cay Johnston, CJR on Tue 29 Jan 2013 at 05:41 PM
Thanks for the pointer, Bill, and apologies to readers for the typo. It's corrected now.
#3 Posted by Greg Marx, CJR on Tue 29 Jan 2013 at 05:48 PM
The NYT authors did not consult with any sales tax authorities in deciding what ought to be considered subsidies through the state sales taxes. Sloppy work done by NYT on an important topic. Too bad an opportunity for sound tax policy got blown.
#4 Posted by Mike, CJR on Wed 30 Jan 2013 at 03:50 PM
In a world where Republican dominated state governments are discussing eliminating all income taxes in favor of revenue from sales taxes, sales tax breaks as incentives must be accounted for, IMO.
#5 Posted by Jim Satterfield, CJR on Wed 30 Jan 2013 at 11:45 PM
Nice corrective, Mr. Johnston. Thank you. Good to see Good Jobs First get some credit too.
On the sales tax issue, I think of it this way: if the law says you have to pay the tax, and the legislature gives you an exemption, then its a tax break.
It might be good policy to avoid creating "cascading tax" payments for some companies while allowing vertically integrated firms to avoid them. But it might not be. After all, these days we're told it's all about keeping one's head count under 49, to avoid "Obamacare." (And while this is probably a bad business strategy, long-term, it has currency among small business folk). So one could argue that tax policies that encourage larger firm formation generally--if not vertical integration specifically--might be good. Good for workers, anyway, who tend to make better wages and benefits if they work for bigger companies.
Just sayin'.
#6 Posted by Edward Ericson Jr., CJR on Thu 31 Jan 2013 at 12:10 PM
The arguments used about sales taxes for business are just as applicable for sales tax for individuals - if sales taxes discourage someone from purchasing from another, that's an economic distortion which is bad for the economy.
I'm all in favor of eliminating sales taxes altogether, but that doesn't change the basic message that sales tax waivers targeted to a particular corporation are a gift to that corporation.
The point of the NYT series is to expose cases in which those can afford lobbyists are taking benefits from those who can't. Sales tax is deservedly part of that picture.
#7 Posted by Geoff, CJR on Fri 1 Feb 2013 at 12:28 PM