Maine’s government watchdog agency took a new look at a state business incentive tax credit program and came up with an old conclusion.

Investigators from the Office of Program Evaluation and Government Accountability could not determine whether the Maine Seed Capital Tax Credit program could meet any of its stated goals, either for job creation and retention or for attracting investment.

It’s important to note that the investigators did not find that the program was not meeting its goals. They found that the information collected by the state was not sufficient to answer the questions.

We’ve been here before.

For years, interest groups have challenged the notion that the state can use tax incentives to create new jobs.

Unlike research and development grants, which have a solid track record of creating new businesses and jobs, tax breaks for businesses are harder to evaluate.

To justify those programs, the state would have to prove that, if not for the program, the new jobs would not have been created and the new investment would have gone elsewhere.

And according to OPEGA, they are not doing that.

From the report:

“Although the goal of the program is to create and retain jobs, there are no effective program design elements that drove toward this outcome. Participating businesses we spoke to described a range of experiences with job creation and retention but there is a lack of systemic program data to reliably measure this outcome.”

And:

“Another program goals is to increase investment, but we identified design features that permit credits to go to investors that may have invested anyway due to a connection with the business.”

A lack of access to capital is often cited as a deterrent to new business formation, and new businesses are the most prolific source of new jobs. Maine has a strong interest in helping these businesses get started.

But, obviously, the program should not give out another dime to investors until the state can show that it works. The Legislature and Finance Authority of Maine will have to do a lot more work to build data collection into this and other incentive programs to show that they are not just giveaways to people who don’t need the help.

Correction: An earlier version of this editorial misstated the agency that oversees the Seed Capital Tax Credit program. It is the Finance Authority of Maine.


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