Thread by @johnmoz

The new federal COVID relief law contains provisions that would essentially call a three-year truce in new state corporate welfare programs. As then-VP @JoeBiden famously said about the Affordable Care Act, "this is a big f**king deal." Quick thread:

The American Rescue Plan Act creates a $220 billion Coronavirus State Recovery Fund. To share in this money, states can't "directly or indirectly" fund new tax cuts with it. That specifically includes "a rebate, a deduction, a credit or otherwise." congress.gov/bill/117th-con…

That means that between 60 days from now and the end of 2024, states that create new tax credit programs will have to pay the federal government back the net amount of however much tax revenue they lose to those programs. Essentially, any tax abatement would cost twice as much.

This is wonderfully similar to what @MichaelDFarren and I proposed last spring during the early rounds of COVID relief, that Congress could and should use the opportunity of propping up state budgets to impose a peace treaty in the corporate welfare wars. thehill.com/opinion/financ…

While this doesn't go as far as Farren & I proposed, there's still real value in putting roadblocks in the way of states' plans to launch new corporate welfare giveaways in the name of "economic recovery." (See, for example, New Jersey's $14 billion boondoggle passed in January.)

(And yes, for folks here in Michigan, this would seem to put a stake in the heart of efforts to revive the Good Jobs for Michigan mega-subsidy package for at least the next few years. That zombie will remain in its grave where it belongs.) #mileg

Interpretation & enforcement will matter. The law's clear intent is to keep the federal government from funding all sides of states' corporate welfare race to the bottom; SecTreas @JanetYellen will have to decide whether that includes municipalities' subsidy deals. (It should.)

And while you can argue - and states will sue - over Congress claiming this much control over state tax codes and budgets, that's not an issue with state economic development tax abatements. Those are interstate commerce, which Congress has clear Constitutional power to regulate.

This isn't a silver bullet for the massive (~$95 billion) corporate welfare swamp of state & local economic development programs, but by potentially giving us a few years where the problem at least doesn't get WORSE it may end up being a critical inflection point for reform.

The big thing now will be to seize this opportunity for reform, accelerate the growing changes in the way people think and feel about economic development subsidies, and help local leaders identify and eliminate barriers to meaningful economic opportunity for everyone.

And yes, as @JoeBiden might say, that's a big f**king deal.

/thread