Category Archives: Economy

Good Intentions versus Effective Outcomes: An Analysis of Selected New Mexico Tax Incentives

Source: Greg LeRoy, Thomas Cafcas and Philip Mattera of Good Jobs First, and Lisa Christensen Gee and Dylan Grundman of the Institute on Taxation and Economic Policy, March 2017

From the blog post:
A study released today examining various tax incentives and tax accounting practices in New Mexico found that the state could gain more than $206 million per year by enacting safeguards common in other states. The study also finds that New Mexico lags behind most other states in making public relevant information about its tax incentive programs.

Those are the main conclusions of “Good Intentions versus Effective Outcomes,” a study released today by Good Jobs First, a non-profit, non-partisan research center.

With’s agreement to collect gross receipts tax on in-state sales, a fair application of the same tax to all online retailers could boost state revenues by almost $42 million. The state also has the opportunity to close a loophole that costs the state at least $27 million by fully enacting combined reporting (which prevents multi-state companies from shifting profits and tax burdens away from New Mexico). The study also recommends the phasing out of the High Wage Jobs Tax Credit program, which costs $70 million per year, and that the state also consider reversing a corporate income tax accounting rule (single sales factor apportionment) that costs the state $45 million per year and has not increased manufacturing jobs.
Press ReleaseAbstract

Private Equity Wins Even When It Loses, Thanks to Debt Markets

Source: Nabila Ahmed and Sridhar Natarajan, Bloomberg, March 20, 2017

The Payless shoe company was already on its way to becoming another retail victim of the internet when the private equity guys showed up.

That the firms — Golden Gate Capital Inc. and Blum Capital Partners — weren’t able to turn Payless around after acquiring them in 2012 isn’t so surprising. That they’ve still made out so handsomely is.

As Payless shutters hundreds of stores and struggles to repay $665 million of debt, Golden Gate and Blum turned a profit on the deal. How? By having Payless borrow millions in the financial markets, a move that’s pushing the company to the brink. The firms have collected $350 million from Payless through debt-funded special dividends. Golden Gate and Payless declined to comment and Blum didn’t respond to requests.

Private equity firms have always borrowed to buy companies. But now, with debt so cheap, they’re layering on subsequent borrowing at an unprecedented clip to pay themselves, putting an additional, and at times fatal, financial strain on their newly acquired companies. From the start of 2013, private equity owners have taken out more than $90 billion in debt-funded payouts, according to data compiled by LCD, part of S&P Global Market Intelligence…..

235,000 Job Growth in February Is Good News for the Economy, But State and Local Government Job Growth Remains Weak

Source: Lucy Dadayan, Donald J. Boyd, Rockefeller Institute of Government, By The Numbers, March 2017

• Nationally, state and local government employment is 1.5 percent below its prior peak, while private sector employment is 6.4 percent above its prior peak.
• State government employment nationally is 2.5 percent below its peak level and local government employment is 1.3 percent below its peak level.
• State government non-education employment, for services such as corrections, hospitals and other health care, public welfare, and highways, has fared the worst among the government subsectors —- currently, 5.5 percent below its peak even though the population has grown 6.9 percent over the same period.
• Local government education and non-education employment are 2.0 percent and 0.8 percent below their respective prior peaks, while elementary and secondary enrollment has risen by more than 2.0 percent during the same period.
• The only subsector that has grown is state government education employment for universities, colleges, and similar services; here employment is up 1.2 percent above the prior peak, but still far weaker than in previous economic recoveries.
• Although state and local government employment did not decline as much during the Great Recession as private sector employment, it has been recovering far more slowly and has regained the jobs lost to the Great Recession.

A New Panel Database on Business Incentives for Economic Development Offered by State and Local Governments in the United States

Source: Timothy J. Bartik, W.E. Upjohn Institute for Employment Research, Upjohn project no. 34435, February 2017

From the“>summary:
This report outlines a new database that contains better information on state and local business taxes and economic development incentives. It includes an explanation of how the database is constructed, and it subjects the database to some preliminary analyses to begin to answer questions about how incentives vary.

The report begins with a section providing context, including reviews of previous research. It then outlines the methodology and data sources for the database. The bulk of the report uses the database to describe incentives and how they vary by industry and state, over time, and by type of incentive. The report also considers how different policies alter net taxes after incentives, and it describes some simple correlations between taxes, incentives, and state economic characteristics and trends.

The accompanying appendices provide additional details on methodology and data, comparisons with other studies, time patterns of incentives and taxes for each state in the database, and much more.

Work in and beyond the Second Machine Age: the politics of production and digital technologies

Source: David Spencer, Work, employment and society, Vol 31, Issue 1, 2017
(subscription required)

From the abstract:
Erik Brynjolfsson and Andrew McAfee, in their widely read and politically impactful book The Second Machine Age, highlight the costs and benefits of digital technologies for the volume and quality of work and identify reforms designed to ensure that digital technologies deliver net advantages to workers and society more generally. This article offers a critique of their thesis. Specifically, it criticizes the authors for their neglect of the nexus between the politics of production and digital technologies. They fail, in short, to grasp the importance of power relations for the form, direction and outcomes of digital technologies. The article argues for an alternative view of the progress of digital technologies that is rooted in an understanding of the political economy of capitalism. In this respect, it draws on and applies ideas and concepts from Marxian political economy.

Weak Foundations in Economic Development Programs

Source: Hart Hodges, Steven E. Henson, Economic Development Quarterly, OnlineFirst, First Published March 1, 2017
(subscription required)

From the abstract:
The existing literature on the relationship between employment growth and firm characteristics (such as firm age, size, and sector) has been used to justify a variety of economic development policies and job creation programs. Some of the programs highlight the importance of small firms, others emphasize the importance of young firms, and others highlight the importance of older, more established firms. The fact that each of these programs can find something in the literature that supports its particular focus suggests problems in the connection between the literature and policy formation. The authors find that the empirical support for such programs is weak. The statistical significance of firm characteristics depends critically on the model specification and/or data set used. Moreover, these characteristics explain only a small fraction of the variation in job growth, leaving policy makers with relatively weak policy tools.

State Taxation and the Reallocation of Business Activity: Evidence from Establishment-Level Data

Source: Xavier Giroud, Joshua D. Rauh, US Census Bureau Center for Economic Studies Paper No. CES-WP-17-02, January 11, 2017

From the abstract:
Using Census microdata on multi-state firms, we estimate the impact of state taxes on business activity. For C corporations, employment and the number of establishments have corporate tax elasticities of -0.4, and do not vary with changes in personal tax rates. Pass-through entity activities show tax elasticities of -0.2 to -0.3 with respect to personal tax rates, and are invariant with respect to corporate tax rates. Reallocation of productive resources to other states drives around half the effect. Capital shows similar patterns but is 36% less elastic than labor. The responses are strongest for firms in tradable and footloose industries.