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Legislative sessions in most states either started recently or will start soon, so it seems like a good time to take stock of what’s happening at the state level and what I’ll be paying attention to in the coming year when it comes to corporate subsidies and the larger effort to rein in corporate power—which has gained a lot of momentum in the last couple of years, hence the length of this post. Exciting!
This is, of course, not an exhaustive list—because I can’t possibly know what’s happening in 50 states at any one moment—and time, political circumstances, and local and world events will necessitate putting new things on the docket and removing stuff that isn’t relevant anymore.
But as of right now, here’s what I’ve got my eye on.
Corporate Incentive Reform and the Interstate Compact Against Corporate Tax Giveaways: New York last week held a day-long hearing on the mess that is its state economic development system, which will lead to, I hope, some genuine attempts at reform. There are two state senators there—Sens. James Skoufis and Julia Salazar—who seem ready to take on the effort. (Read this from Reinvent Albany on 10 things the New York legislature should do.) Utah is also doing a deep dive on its corporate subsidy system. And of course, I’ll be pushing for more states to take a serious look at the Interstate Compact to Phase Out Corporate Tax Giveaways, under which states would join together to ratchet back and eventually eliminate company-specific giveaways.
#BanTheNDA: Regular readers know that I have a big gripe against the use of non-disclosure agreements in economic development deals, which prevent public officials from divulging any details of the deal until, usually, it’s signed and sealed, including the identity of the corporation receiving public money. These agreements are corrupt on their face. Bills in three states—New York, Illinois, and Florida, from three of the best state legislators around, Sen. Michael Gianaris, Sen. Robert Peters, and Rep. Anna Eskamani—would ban them outright.
New York Antitrust Reform: Over the summer I wrote a bit about an effort to reform New York State antitrust law to better protect the state’s local businesses and workers. The bill is back and has already passed the state Senate’s Consumer Protection Committee. I wrote a longer explainer here, but the short version of what it would do is create what’s known as an “abuse of dominance” standard for New York antitrust law. Corporations that are considered dominant—by having 40 percent of a product market or 30 percent of a labor market—would be precluded from using a host of abusive practices to, well, abuse that dominance. Crucially, if it were to become law, New York would be the first state with an antitrust law that explicitly points to labor market power—using dominance to drive down wages—as a potential antitrust violation. The bill would also allow the New York attorney general to review mergers, with a specific eye toward labor effects, i.e., layoffs in the name of “efficiency.”
App Store Reforms: I wrote a bit about this last year too: There are multiple state efforts to rein in Apple and Google’s power over developers in their respective app stores. Currently, Apple and Google not only take a 30 percent cut of revenue from developers who sell “digital goods” (or 15 percent if they make under $1 million), but they legally bar developers from communicating to customers that prices might be lower elsewhere, like, for example, if buyers made their purchase through the developer’s own website. This power is only applied to whatever Apple and Google call “digital,” so a small fitness app or a dating site counts, while something like Uber doesn’t. Illinois released its version of the legislation this week, called the “Freedom to Subscribe Directly Act,” led by Sen. Sara Feigenholtz, and Florida, Minnesota, and New York have their own bills. I expect to see the same thing in a few other states too, including Arizona, where a similar bill passed the state House last year only to fall to a corrupt deal in the state Senate.
Corporate Subsidy Arms Races: The first few items were things I’m excited about, but put this one down in the worrying category: I think we’re going to see arms races on corporate incentives in a few specific areas. First, as I’ve written before, is electric vehicles. Next is semiconductors: I expect we’ll see a major incentive package for this Intel plant in Ohio, and some more elsewhere. Finally, the film tax credit subsidy war is not slowing down, with two of the major players, California and New York, very much working to ensure they’ll be spending hundreds of millions of dollars subsidizing films every year forever, and other states getting ready to pile in.
Amazon Warehouse Reform: Last year, California approved a new law regulating production quotas in warehouses, which was pretty squarely aimed at Amazon and its algorithmic driven practices. Especially after what happened when an Amazon warehouse in Illinois was hit by a tornado a few months back, I’d be surprised to not see more legislating here, not just on quotas but on broader worker safety issues and warehouse construction standards.
State Attorneys General Big Tech Cases: This isn’t a statehouse thing, but what the heck: I’ll be keeping an eye on the various state-level antitrust cases against Big Tech firms, including this refiled case against Facebook that is led by New York, a Texas-led case against Google’s monopoly in digital ad technology, and Washington, D.C.’s, innovative case against Amazon for raising prices across the Internet. (You can watch D.C. Attorney General Karl Racine explain the ins and outs of the case in the last segment of this event.)
Digital Ad Tax Litigation and Bills: This one is a court case first, which will cause a slew of legislating depending on how it goes: Maryland last year passed a digital ad tax on large corporations, overriding the veto of Republican Gov. Larry Hogan. The idea is to tax the revenue Facebook, Google, and Amazon make off of the sale of targeted advertising. The law is now tied up in court, and I am by no means qualified to assess the various claims about it. But if it does pass judicial muster, you better believe a bunch of other states are going to pile in—Massachusetts even has a series of bills lined up and ready to go—because the money here is very real: Tens if not hundreds of millions of dollars in revenue for state governments.
The Good, Bad, and Ugly of Federal Relief Spending: Others are far more attuned to state budgets than I am, but a theme of the year will definitely be what states do with the significant amount of aid they have received from the federal government to deal with coronavirus. Hopefully we see more broadband buildup and less cooking the books in order to facilitate a billion dollar transfer to the steel company Nucor, which is what West Virginia did, especially since the latter violates federal relief rules, most definitely in spirit if not in letter.
This post initially appeared in a slightly different form on the author’s Substack, Boondoggle, on January 20, 2022.
Pat Garofalo is the author of The Billionaire Boondoggle: How Our Politicians Let Corporations and Bigwigs Steal Our Money and Jobs, the Boondoggle newsletter, and the director of state and local policy at the American Economic Liberties Project.
