Harbor East, the home to several large buildings paying very little in taxes.
Harbor East, the home to several large buildings paying very little in taxes. (Erin Maywhoor)

Starting now, governments have to account for the losses they suffer in giving tax breaks to big business.

"We think this is going to be the big watershed breakthrough for the reporting of this inequity," says Greg LeRoy, the executive director of Good Jobs First, a nonprofit that tracks corporate subsidies.


Good Jobs First takes credit for prompting a rule change by the Government Accounting Standards Board, a private, Connecticut-based nonprofit that makes the rules government accountants are supposed to follow—at least if they stamp the words "Generally Accepted Accounting Principles" on their work.

Called "Governmental Accounting Standards Board (GASB) Statement No. 77 on Tax Abatement Disclosures," the new rule, which quietly went into effect this week, requires city comptrollers and other local and state taxing authorities to put, in a footnote to their Comprehensive Annual Financial Reports, the exact dollar amount that tax breaks for developers, stadium giveaways, incentives to "job creators," and other economic development cost other taxpayers in the jurisdiction.

City Paper reached out to Baltimore Comptroller Joan Pratt for comment. She did not respond.

"I think it's great. I think it's what I've been trying to do independently," says City Councilman Carl Stokes, mayoral candidate and frequent critic of Tax Increment Financing and other development tools the city has used, when told about the new rule. "We lost money this year from our state education formula because we have what I call ghost wealth. We got a $100 million development and they're not actually paying any taxes."

Baltimore was found to have $1.3 billion in new taxable property in 2015—a faster growth rate than any other Maryland jurisdiction. But the state's funding formula, which takes into account the tax base of each county in order to determine how much state money a school district receives, does not calculate the taxes actually paid. So the Baltimore Marriott Waterfront Hotel—which pays $1 per year in property taxes through the year 2025—cost city schools more than $1.4 million. The total hit was calculated in February at $35 million.

LeRoy says this kind of thing is exactly what the new rule is meant to illuminate.

"School boards lose money passively as a result of actions by local governments," he says. "So they will have to account for that now."

Though the rule goes into effect now, it will be years before most the reports are made public, because of the way budget years work. "When this new data starts flowing in 2017, we will finally have a price tag on corporate welfare like never before," LeRoy says, adding that Maryland, with its 24 jurisdictions, will make an excellent laboratory to see what effect the new accounting rule has on policy.

"Pennsylvania has more than 5,000 local taxing authorities," LeRoy says. "So in Maryland, you will be able to get the information and do an analysis relatively easily."