Political Update – February 12, 2013
Why Some State Incentives for Business Work—And Others Don’tTOM FOLEY AND BEN ZIMMER The Wall Street Journal February 8, 2013 Every state does it, to one degree or another: pays incentives to private companies to keep jobs in-state. Supporters say this is necessary for job creation, detractors call it corporate welfare, and nationwide it costs more than $80 billion a year. So when are such incentives sound economic policy, and when do they merely serve certain firms, lobbyists and politicians? Jobs created with incentives are good when they are net contributors to the economy. They are bad—handouts, effectively—when the incentives cost the state more than the jobs contribute back to the economy. The Connecticut Policy Institute has identified three criteria for determining when job incentives go from good to bad: • Does the total cost of the incentive exceed the amount that would be paid back through incremental tax revenues over 10 years? In most states, this threshold is crossed when the total cost of the incentive rises above 50% of the annual compensation for jobs kept or created. • Do the incentives provide only for jobs that would not otherwise come to the state, or would otherwise leave? • Do the incentives promote jobs that will remain viable and stay in-state after the incentives expire? Keystone’s Mission: To recruit, support and advocate for candidates for public office who support private sector job creation, low taxation, a responsible regulatory environment, and effective delivery of essential state services. Keystone’s Goals:
“Jobs created with incentives are good when they are net contributors to the economy. They are bad—handouts, effectively—when the incentives cost the state more than the jobs contribute back to the economy.” Tom Foley & Ben Zimmer, “Why Some State Incentives for Business Work – And Others Don’t”
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