Editor’s Note: To Incent or Not to Incent?
Research indicates that incentives “tip” only 20 percent of location decisions, but it seems that’s a percentage that states and communities aren’t willing to relinquish.
Q1 2019
In a recent report, Timothy Bartik, an economist with the Upjohn Institute for Employment Research in Kalamazoo, Michigan, looked at incentives nationally. He estimated that incentives “tip” only about 20 percent of all projects — the remaining 80 percent of projects would happen anyway, even without the incentives, he noted. Yet, because many locations use incentives to help lure businesses, all states and cities feel they must provide incentives in order to compete for a project’s promised jobs and tax revenue. Former Delaware Governor Jack Markell explained this dynamic in a New York Times op-ed piece. He noted that companies see the offer of incentives as evidence that a locality is committed to their company’s future.
Our recent annual Corporate Survey — the results of which are presented in this issue — confirms the importance of tax exemptions and other state and local incentives to businesses, with more than 80 percent of the respondents rating these factors as “very important” or “important.” But, as Markell said, “It would be better for taxpayers if these kinds of cash incentives could be invested instead in such things as schools and infrastructure.”
A recent article in Inc. tends to agree — especially when it comes to building up “innovation ecosystems.” Without investment in education and infrastructure, a location cannot support high-value industries no matter what incentives they offer, the article noted. Nonetheless, incentives will remain in the economic development toolbox and if properly targeted and evaluated — e.g., to firms that invest in R&D or skills training, said Bartik — they can hold value for a community as well as a company. So, the question remains, to incent or not to incent?
Project Announcements
Finland-Based ADMARES Plans Waycross, Georgia, U.S. Manufacturing Plant
06/01/2023
Toyota Plans Georgetown, Kentucky, Electric Vehicle Operations
06/01/2023
Ranger Design Establishes North Charleston, South Carolina, Operations
05/31/2023
Austrian-Based Kronospan Expands Oxford, Alabama, Operations
05/30/2023
TiiCKER Expands Grand Rapids, Michigan, Operations
05/30/2023
Hanon Systems Establishes Bulloch County, Georgia, Operations
05/26/2023
Most Read
-
Is a Flurry of Fads Shaping Economic Development Policy?
Q2 2023
-
37th Annual Corporate Survey: Economic Pressures Exerting Greatest Effect on Decision-Makers
Q1 2023
-
Nearshoring — North America’s Next Factory
Q2 2023
-
Front Line: Water Supply Increasingly Affecting Location Decisions
Q2 2023
-
First Person: Labor Crunch in the Construction Industry
Q2 2023
-
Life Science Conversions in Real Estate
Q2 2023
-
19th Annual Consultants Survey: Clients Challenged by Tight Labor Market, Energy Availability
Q1 2023