What's the True Cost of America's Tax Incentive Folly?

The Times delves deep into the financial incentives that cities, counties, and states dole out to corporations to lure jobs and economic development to their corner of the country. Just what does the $80 billion spent each year actually buy?

2 minute read

December 3, 2012, 8:00 AM PST

By Jonathan Nettler @nettsj


Once focused on automakers, and now sought by everyone from Caterpillar to Facebook, governments in every corner of America "who are desperate to create jobs, outmatched by multinational corporations and short on tools to fact-check what companies tell them" use incentives to attract and keep businesses large and small without a clear indication that those investments ever pay off. "For local governments, incentives have become the cost of doing business with almost every business," says Louise Story. "The Times found that the awards go to companies big and small, those gushing in profits and those sinking in losses, American companies and foreign companies, and every industry imaginable."

Exploiting local fears that companies would move jobs overseas, or over county lines, corporations have created  "a high-stakes bazaar where they pit local officials against one another to get the most lucrative packages. States compete with other states, cities compete with surrounding suburbs, and even small towns have entered the race with the goal of defeating their neighbors."

At the same time that local governments are cutting back on services, they're creating new tax credits and exemptions. And while incentives take many forms - cash grants and loans; sales tax breaks; income tax credits and exemptions; free services; and property tax abatements - it's unclear how effective certain ones are over others, or over nothing, because government agencies and officials "rarely track how many jobs are created," notes Story. "Even where officials do track incentives, they acknowledge that it is impossible to know whether the jobs would have been created without the aid."

This article is the first in the Times' United States of Subsidies series. The series is accompanied by an extensive interactive database of incentives cataloged by state and company.

Saturday, December 1, 2012 in The New York Times

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