Ohio Tax Credits Face Scrutiny Amidst Questioned Return on Investment

Ohio's Economic Incentives Face Scrutiny Over Return on Investment

A new report by Policy Matters Ohio indicates that the state's extensive tax credits and incentives, totaling more than $12 billion annually, are yielding slow or negligible returns on investment. This figure represents over a quarter of Ohio's total annual revenue. The report specifically highlights over $1.2 billion in incentives directed towards four major corporate projects, questioning their actual economic benefit to the state.

Major Projects Detail: Credits and Commitments

Ohio's economic development strategy heavily relies on significant tax incentives to attract large-scale corporate investments. Notable projects include:

• Intel (INTC): Received a $650 million Job Creation credit in 2022 for its planned semiconductor fabrication plants in Licking County. These plants, initially expected to be operational by the mid-2020s, have seen their timeline pushed back significantly, with the first facility now anticipated to begin operations between 2030 and 2031.
• Honda: Approved for a $71.3 million Job Creation Tax Credit in October 2022 for an "EV Hub" in Ohio, including a joint venture battery plant with LG Energy Solution (L-H Battery Co.). This facility is reportedly nearing completion.
• Joby Aviation (JOBY): Awarded a $93 million Job Creation Tax Credit in 2023 for its electric vertical takeoff and landing (eVTOL) vehicle production site in Dayton. The facility is progressing, with machinery beginning to move in.
• Anduril Industries: Secured an estimated $452 million tax incentive and a $310 million grant from JobsOhio in January 2025 for its planned advanced manufacturing facility, "Arsenal-1," in Pickaway County. Anduril has committed to creating 4,000 Ohio jobs by 2035 and investing at least $910.5 million in capital improvements.

Intel's Delayed Operations Raise Financial Concerns

The most significant project under scrutiny is Intel's $28 billion semiconductor manufacturing complex. The delay of its operational timeline by at least five years, now targeting 2030, has raised questions regarding the company's financial strategy and its ability to maintain competitiveness. Intel has been under pressure to conserve cash, resulting in capital expenditure cuts and dividend freezes, alongside significant employee layoffs in 2023. While Intel's stock has experienced considerable volatility, losing over half its value in the past year, it saw a modest increase following the delay announcement. However, key financial indicators reveal ongoing challenges: the company reported a negative operating margin of -8.29% and net margin of -38.64%. Its Altman Z-Score of 1.59 places it in the distress zone, signaling a potential risk of bankruptcy within the next two years. Furthermore, valuation metrics such as a Price-to-Sales (P/S) ratio of 2.74, Price-to-Book (P/B) ratio of 1.5, and a forward P/E ratio of 52.82 suggest potential overvaluation given its current financial health and delayed project timelines.

Broader Economic Context and Policy Implications

The report argues that despite the substantial investment in corporate incentives, Ohio consistently underperforms national economic indicators across critical measures such as job creation, unemployment rates, and GDP growth. This ongoing underperformance fuels the debate on whether these tax credits genuinely stimulate broad economic health or primarily benefit a select few large corporations. The Job Creation Tax Credit is identified as the state's primary economic development incentive, with $705 million in outstanding credits anticipated by the end of the current biennium.

Expert Perspectives and State Justification

Zach Schiller, research director for Policy Matters Ohio, contends that any tangible payoff for the state is "difficult to see," noting Ohio's continued lag behind the national average. He questions the necessity of incentives for companies like Honda, which has a long-standing presence in the state. Conversely, state entities like JobsOhio defend the efficacy of these programs, asserting that "A company must first create the jobs before realizing the credit, and credits are not given unless the actual jobs are created." The Ohio Tax Credit Authority holds the final decision on awarding these credits, emphasizing a performance-based mechanism.

Outlook: Navigating Future Investment and Fiscal Policy

The findings of this report are likely to intensify scrutiny on state economic development incentives, potentially influencing future policy decisions in Ohio and other states employing similar strategies. For companies with significant long-term projects tied to state subsidies, such as Intel, the delays underscore inherent execution risks and the potential for prolonged timelines. Investors will be watching for signs of improved economic performance in Ohio and the ultimate realization of the job creation and investment commitments made by these incentivized corporations, particularly given the state's recent tax reforms aimed at stimulating business investment. The balance between attracting large enterprises and ensuring a robust, equitable return for the state's broader economy remains a critical challenge.