The lawyers, lobbyists and advocates for corporate welfare demonstrate a lot of creativity. They’ve developed a variety of gimmicks to hide financial transfers collected by their clients. Let’s dig in on what they’ve come up with because it shows a remarkable effort to conceal taxpayer payments to select companies.

• It’s not a check, it’s a payroll withholding tax refund.

Some programs transfer a large amount of money through direct payments to beneficiaries. But the payments are given a technical term to make them seem like something other than taxpayer subsidies to businesses that got special deals from the government.

One example is in Kansas, where select companies get a payment from state government based on the amount of state income tax withheld from employee paychecks. The companies collect money from state government, but the payment is called a payroll withholding tax refund.

The different terminology helps lawmakers ignore the costs of deals. If officials believe that the company would not add jobs without the extra deal from the state, then they feel they can ignore the costs of a deal, because it only spends money the state wouldn’t have in the first place.

This excuse is built on a lot of assumptions, like whether the state is paying for something that would have happened anyway. Was getting to collect 6% of what the company pays employees really what sold the deal, or was that going to happen regardless? (Is anyone involved in the deal interested in answering that question? Or are they happy to put out press releases that credit lawmakers for job announcements?)

Another reason why it’s not costless is that the company getting a deal competes in the marketplace. Are they competing for customers and contracts with other local businesses? If so, then there are real costs to the state treasury and the economy.

It ought to be obvious that there are costs when companies collect checks from Michigan taxpayers. But calling it something else helps conceal the transactions.

• It’s just a tax break. Pay no attention to the millions we’re taking out of the state.

Taxpayers in New Jersey now pay up to 45% of the costs to shoot a film in New Jersey. It’s an extraordinary transfer of the costs of private economic activity to the state government. I’m sure any other business would love it if they got taxpayers to pay 45% of their costs. Yet it’s rarely portrayed this way. It’s referred to as a “tax break,” or “incentive” or “credit.”

Film subsidy supporters have used a clever method to complicate the matter and obscure their payments from taxpayers. They get to launder their money through other businesses’ tax returns, by design, in a way that is allowed by the statutes authorizing the program.

Film producers get credits against the state’s business tax. But the film production company tends not to have any liability against the state’s business tax. The producer has expenses in the state, but businesses don’t pay business tax on their expenses.

If it were just a credit against a tax liability that the film producer doesn’t owe, then film subsidies would hardly be an incentive to shoot in the state.

The trick is that the credits they receive are transferrable.

Film producers get to sell their credits to other businesses that have business tax liabilities. The credits are sold at a discount, so purchasers get more in credits than they pay in cash and therefore come out ahead. And the film producer gets to sell a tax credit that was useless to him for cold hard cash.

Taxpayers, in the meantime, pay for a huge portion of a film production’s costs. Few notice the transfers, and the journalists covering the story tend to be misled about the whole business. It’s quite the trick.

• You don’t need to put the money in the budget.

State constitutions tend to require legislators to authorize payments out of the state treasury. It’s a basic principle of American government: Legislators get to control the pocketbook, and they have to authorize money to be spent. But there is a corporate welfare loophole. Subsidies don’t get counted as outlays in the budget if the payments are made through tax administration.

The simplest way to do this is to authorize large tax credits to select companies and to make the credit refundable. A dollar’s worth of tax credit is usually worth a dollar’s worth of tax liability. If a tax credit were not refundable, the limit of the credit’s generosity would be the company’s own tax liability. But when a credit is refundable and credits are larger than the tax liability, the credit delivers someone else’s money to the recipient.

It’s why Michigan operates a tax that gives out more revenue than it raises. The Michigan Business Tax is only filed by companies that have credits against the Michigan Business Tax. Its “taxpayers” are going to collect $500 million more than they owe this year.

State legislators don’t need to count those payments in their annual budgets. The state refuses to disclose how much each particular company collects from the treasury. So hundreds of millions of dollars get transferred to select companies in secret and without budget authorization. Oof.

Other states are even more slick in concealing transfers to companies. In Georgia, credits for research and development can apply against the company’s payroll taxes. When companies pay employees, they have to send the state required withholdings to pay for the employees’ expected income taxes from their wages and salaries. Crediting against a firm’s payroll taxes means that the company gets to keep what it would have sent on behalf of employees. Employees don’t get to pay less in income taxes; this mechanism just lets the company keep the money it would have transferred to the state on their behalf.

While the structures I mention conceal corporate welfare, people ought not read too much into the motives of legislators who authorize these convoluted programs. Perhaps there are good public policy reasons behind them.

But perhaps the motives are more about politics. I want to share a time I spoke with an environmental lobbyist. He had gotten legislators to approve a transferrable tax credit some years ago. The program incentivized landowners to do more conservation work. I asked why the credit wasn’t refundable, given that the landowners would have received a more valuable incentive than a credit they would have to sell at a discount. He said it was a political calculus; it was easier to get legislative approval if benefits were less direct.

In other words, appearances matter in politics. It can be easier to get legislative approval when the transactions are more complex than they need to be.

Not every tax break is corporate welfare, though. Sometimes states give a company the privilege of paying less in taxes than it would otherwise owe. Sometimes governments build new sewers and roads that benefit a company, but don’t transfer resources to the company. Not every dollar in corporate welfare deals is a concealed transfer of cash.

Legislators don’t always go through the rigamarole mentioned above. Companies can just get taxpayer cash authorized by legislators in budget bills. These are simple transfers, authorized by lawmakers without the pretense they are anything else.

In addition to the simple business subsidies, there are complex methods used to conceal the direct payments of cash to select companies. Business subsidy proponents have renamed payments to pretend that cash isn’t cash, funneled money through the tax code rather than through the budget, and laundered money through other taxpayers.

People should know how their money is being spent. We should ask our lawmakers to be plainer and more direct. And we should hope that reporters, critics and regular voters see through the subterfuge when lawmakers attempt to hide their corporate handouts.

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