Krit Chanwong
Krit Chanwong and Scott Lincicome
In a new Cato policy analysis out today, September 19, we show that state and local corporate subsidies have increased substantially in recent years, even though their economic costs typically exceed any plausible regional benefits. The paper finds, among other things, that the growth of these corporate incentives is likely owed to their enduring political attractiveness and to new federal industrial policy initiatives. It also finds that state and local subsidies routinely create problems beyond their high budgetary (taxpayer) expense.
Ohio’s latest subsidies to US chipmaker Intel may unfortunately provide us with yet another example.
As Scott Lincicome explained in a recent op-ed, Intel was just awarded the largest federal subsidy package under the 2022 CHIPS and Science Act (up to $44.5 billion in grants, loans, and tax credits), even though the company faces financial and strategic headwinds that have been building for decades. Key to Intel’s federal subsidy award was its promised construction of a huge chip facility in New Albany, Ohio, which has received further financial support from state and local governments, including:
A $1.941 billion subsidy from Ohio’s state government. These include $600 million in grants and $650 million in tax incentives over thirty years. This is the largest incentive package in Ohio’s history and represents almost seven percent of the state’s general fund revenue in 2022–2023.
A 100 percent property tax abatement over thirty years from the New Albany local government.
As is often the case, Intel’s Ohio plans were announced to much fanfare in Washington, DC, and Ohio, even though the subsidies’ expected returns were immediately suspect. Intel promised, for example, that the New Albany project would generate 3,000 Intel jobs, 7,000 construction jobs, and “tens of thousands of additional jobs with suppliers and partners.” This would mean, however, that – even under the rosiest of projections – governments were paying at least $1.94 million for each job directly created by the New Albany facilities. » Read More
https://www.cato.org/blog/will-intel-become-yet-another-cautionary-tale-state-subsidies-unseen-costs