Governments are not required and usually choose not to include the increased demand on government services when they outline the cost of tax breaks.


Is it right that one’s tax break imposes an equal tax increase on many others, as they often seem to do unless accompanied by an equal cut in spending?

Should the many be obligated to, or want to, take on some of the burden of the one?

In my humble opinion, the only time that is justified is when the one, before the tax break, is bearing an unfair share of the burden, compared to the many. But that’s never the argument for targeted tax breaks.

Proponents of such tax incentives usually argue that, even with the tax breaks, the new company increases the city’s and state’s revenue, which is usually true, but that logic has a flaw.

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The unanswered question is this: Does it increase the municipalities’ revenue more than the new companies and expanded population increases the cost of maintaining the same level of government services? Right now, we don’t have a definitive answer to that question.

But if we use Nashville as an example, the evidence points to "no."

As Tennessee and Nashville have given companies big tax incentives to facilitate recent rapid economic expansion, the city’s revenue has not kept pace with the expanded need for police, education, infrastructure and other services necessitated by the expanded population.

Soon — this year or next, I predict — the Metro Council will approve another property tax increase, because property and sales taxes from new property and population have not kept pace.

Cities should provide growth cost estimates, claw-back features

That’s why I propose that Tennessee, Nashville and other cities be required by state law to include estimates of the cost of expanded government services in the rationale they use to justify special tax treatment, or grants, to businesses moving to Tennessee. This should also include a claw-back feature if five or 10-year follow-up audits of the actual return on investment don’t measure up to the projection.

This year, the Tennessee legislature is considering a bill, sponsored by Sen. Kerry Roberts, R-Springfield, who is chairman of the Senate Government Operations Committee, to require more transparency and accountability than the law currently requires for projected employment expected by the new companies — and a claw-back feature for missing those targets. Some deals already include that feature but are not required by state law.

FACTS Act: New Tennessee bill would shine a light on economic development incentives

I support the bill but would ask that Roberts or someone else add an amendment to include a projection of other costs to the municipalities, resulting from the economic development, followed by an audit of the costs five or 10 years later, and a claw-back feature if the audit shows a negative cost-benefit to other taxpayers.

The state and city cannot do a true cost-benefit analysis of money invested if they only include the cost of the company’s target tax break.

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I have no doubt that Amazon’s planned operations center with 5,000 promised high-paying jobs will increase Nashville’s revenue, despite the city and state tax breaks. But will it increase it more than the cost of the government services the company and new population will consume?

That’s a question that Amazon, Nashville and Tennessee should be willing to answer for the stockholders — the people of Nashville and Tennessee — who have no say in whether their money will be invested in Amazon’s move.

Ralph Bristol is a former Nashville radio talk show host and former candidate for mayor.

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