December 18, 2013

RENT'S TOO DAMN HIGH:

Corporate tax giveaways are not worth the trouble (Claire Zillman, December 16, 2013, CNN Money)

Tax incentives in exchange for corporate commitments have now become the norm, but research indicates that they rarely do what they promise.

In 2002, economists Todd Gabe and David Kraybill found that "incentives do not result in the creation of more jobs than would have been created without the programs." Peter Fisher now of the Iowa Policy Project backed up that conclusion in 2004 when he reasoned that a community that gave an incentive package equal to 30% tax break could credit just 9% of new jobs to the tax cut.

Recent research from Richard Florida, director of the Martin Prosperity Institute at the University of Toronto's Rotman School of Management, has found no connection between economic development incentives and any measure of positive economic performance, such as average wages and income and state unemployment.

What would contribute to growth are simpler tax codes that treat all businesses equally, says Lyman Stone, an economist at the Tax Foundation. But the tax incentives -- now worth some $80 billion each year -- have become a prisoners' dilemma for states, says Kenneth Thomas, a political science professor at the University of Missouri, St. Louis. They'd all be better off not paying the incentives, but to politicians brokering these agreements, a new development deal and its promised jobs equal talking points and bragging rights. And companies know that's a temptation too great.

Companies recognize the decision of where to locate a factory or headquarters as "a rent-seeking opportunity," says Thomas. "And more and more, [they] are exploiting it to the hilt."
Posted by at December 18, 2013 7:34 PM
  
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