Monday, February 18, 2019

Some states consider limiting or banning tax incentives designed to lure big corporations to relocate

Legislatures in New York, Arizona, and Illinois are considering bills to end or limit the practice of offering tax incentives to lure big corporations to relocate; similar bills may be introduced soon in Connecticut, Florida, Massachusetts and New Jersey, Liz Farmer reports for Governing.

That's particularly apropos after Amazon recently abandoned plans to open a second headquarters in New York City following mounting public objection to the $3 billion in subsidies offered to the business, one of the world's wealthiest.

New York Assemblyman Ron Kim, who co-sponsored New York's version of the bill, said tax incentives often aren't worth what they cost governments and called the competition to snag big corporations a "race to the bottom" in an opinion piece for Buzzfeed.

"An Institute on Taxation and Economic Policy study noted that most giveaways simply move pieces on a chessboard, rather than create actual growth," Farmer reports.

"In the case of retail, as much as 90 percent of the apparent direct benefits of tax incentives are offset by losses among the subsidized retailer's local competitors," according to the study. "While this figure is likely to be lower for industries serving a more national market, states constantly run the risk of harming existing businesses within their borders when they attempt to give some companies a competitive edge through the use of tax incentives."

Corporate tax breaks are tempting for more rural states, but Kim points out that the lower taxes and cost of living are already natural selling points for such places, and says states can better help their economies by beefing up infrastructure and focusing on programs that grow talent locally, Farmer reports. 

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