Last year state and local governments handed about $80 billion in tax
breaks and other financial incentives to private companies, in highly competitive
efforts to attract “new business operations” and “more jobs.”
There’s really no evidence that these government subsidies to
corporations have any enduring positive paybacks—short-term or long-term—for the
states and cities involved.
The “industrial development” funding is a high-profile political
gimmick in many cases, and in all cases it’s pretty much a bald giveaway to the
companies.
Why do taxpayers tolerate this misuse of public funds?
See this report from the Council on Foreign Relations, using New York
Times data.
Government officials claim that they’re spending the money to attract
new jobs to their jurisdictions, but there’s really no serious accountability
for the companies—often the touted job creation never happens, or lasts only a
short time.
In case you’re wondering, $80 billion is about 7 per cent of
state/local tax revenues, so you can figure that 7 out of every 100 dollars you
pay in taxes is being handed over to big and medium-sized companies that are
looking for the freebies, like low-interest construction loans, tax forgiveness
or land that’s been improved at public expense.
The report mentions: “In many . . . industries, subsidies have less
influence on location decisions; manufacturers, in particular, require local
networks of suppliers and employees with specialized training. Local
governments usually lack the sophistication to negotiate successfully with big
companies, so they end up subsidizing businesses that would have invested in
the state regardless.”
It’s a good bet that your local Industrial Development Authority is
pretty much wasting your money.
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