The CHIPS Act: Let’s correct the record

April 3, 2023

Two male arms arm wrestling in black and white with dollar bills all around.
Source: Gratisography / Pexels

No, states, you do not need to give companies billions of dollars in subsidies to attract their CHIPS Act businesses. Tax breaks hurt students – we’ll explain how. And let’s dive into research by UC Berkeley economist that provides even more proof into the fool’s game that makes up so much of economic development today.

The Big CHIPS Act Matching-Subsidy Myth

Public officials, groomed for decades to “give away the store” to attract businesses, are misreading the new CHIPS and Science Act.  Contrary to what some are telling taxpayers, the Act, which includes $39 billion for new semiconductor factories—does not require massive or matching subsidies from states or localities.

Still, microchip manufacturers — all too glad to double dip — aren’t correcting the record.

But I did. Read about what the CHIPS Act does – and doesn’t – require.

What Tax Incentives Do to Schools

The American Planning Association and Good Jobs First held an event to discuss the implications of tax breaks on students and learning.

Whether you’ve never heard of GASB 77 – a powerful tool to keep tabs on how much of our money we’re giving to corporations – or you’re really familiar with it, we think you’ll learn something from the webinar.

Watch a recording of the event here using this passcode: LB&=cP%8

Don’t have time to watch the whole thing? There are really useful links in the chat.

GJF Data Fuels Research on Bidding for Firms

Why do so many companies offer subsidies when they offer such incredibly poor returns on investment?

A recent paper by UC Berkeley economist Cailin Slattery addresses this very question. In her research, Slattery finds that even though, in theory, competing with subsidies might be good for the country as a whole, the gains are very low, and they are all transferred to the companies through tax breaks or other direct assistance. (In this, Slattery is critiquing an influential line of analysis among economists which says state vs. state competition for investment and jobs is not necessarily zero-sum).

She also cautions that even small mistakes in state estimates of what they will gain from a particular deal can wipe out the theoretically possible societal gain of subsidies.

Slattery’s key takeaway: even if some economic gains might materialize from subsidized projects, those gains are transferred to companies or are entirely wiped out by even a small errors in a state’s cost-benefit analysis.

Read more about it here.

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