More Evidence Incentive-Based Economic Development is a Shell Game

More Evidence Incentive-Based Economic Development is a Shell Game

In the midst of ongoing discussions about the purpose and practices of the Arizona Commerce Authority, one of their heralded successes is facing a difficult contraction.  Silicon-based company Zenefits announced it will lay off 160 of their workers mostly within their Tempe facility, and their CEO stepped down.

Zenefits expanded operations into Arizona because the rapidly growing tech firm needed greater access to an affordable yet qualified workforce – Arizona fit that bill.

The Arizona Commerce Authority promised $1.5 million in cash and tax credits against future profits if Zenefits could deliver 1,300 new higher-wage jobs within three years.

Like all new, fast-paced, capital ventures – they’re risky investments and the company is experiencing significant growing pains.  The company announced last June they would hire 700 new employees to fulfill the remainder of their three year commitment by November 2015.  Now, just three months later, many of those very jobs are disappearing again.

Understandably, Zenefits is grappling with lightning speed expansion in the midst of a highly complicated and regulated field.  Less understandably, the Arizona Commerce Authority and fellow incentive champions continue to cling to the narrative that picking winners and losers is good public policy.

Special tax carve outs and cash giveaways to private companies are a gamble with tax payer dollars.  Such unpredictable and speculative practices are better relegated to the free market.  Not to mention such incentives create an uneven playing field where by the very incentives given to one business becomes a disadvantage to competitors or potential competitors.

Not to mention the majority of our businesses and jobs in Arizona are not subsidized.  The jobs created and subsequently rewarded by the ACA are a fraction of the total in the state.  And despite the fact that companies like Zenefits were likely to choose Arizona without special incentives, we still continue to dole them out, so that entities like the ACA can claim them as a win.