Study finds that offering big tax breaks to lure businesses may not help broader economy as often promised - Entrepreneur Generations

Though state and local governments in the United States spend more than $30 billion every year to keep or attract businesses, a new study shows that the deals that offer the biggest incentives don't clearly help the broader regional economy, "The research calls into question the common practice of using narrow, firm-specific tax breaks to attract businesses and boost employment," Richard Rubin reports for The Wall Street Journal.

The researchers studied incentive deals worth at least $5 million from 2000 to 2017. Though counties that attracted companies with incentives typically saw employment in the targeted industry increase by about 1,500 jobs, the researchers found no impact on countywide employment in other industries, Rubin reports. That contradicts common rhetoric local officials often use to sell the public on the necessity of such incentives. "The motivation is often about the indirect jobs that are created," University of Texas, Austin government professor Nathan Jensen told Rubin. "You cannot make these decisions based on indirect jobs."

Moreover, the study found that "low-income areas often provide bigger incentives than more affluent areas, perhaps because they are seen as less attractive places to do business without such offers. Counties with average annual wages below $40,000 pay over $400,000 per job, while those with wages over $100,000 pay less than $100,000, according to the study," Rubin reports. "The researchers also found that larger, more profitable companies are more likely to get richer incentives."

The broad implications suggested by the research: "state and local governments should avoid tax breaks that pay out over many years and instead consider programs that invest more directly in job training and infrastructure that help businesses and have broader public benefits," Rubin reports.

from The Rural Blog https://ift.tt/37JQHf1 Study finds that offering big tax breaks to lure businesses may not help broader economy as often promised - Entrepreneur Generations

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