What’s the real ROI on state and local tax incentives? Not much. By Nancy Clarke | Digital Exclusive - 2020
Bạn đang xem: tax incentive là gì
Not long ago, Amazon announced its tìm kiếm for a second headquarters location. Cities across the U.S. raced to tát roll out the red carpet for the tech giant. From producing wacky videos to tát offering không tính phí local sandwiches—and in the case of Tucson, Ariz., sending a giant cactus to tát Amazon’s Seattle headquarters—each pitch had its unique spin. But while each city’s efforts to tát outdo the competition made headlines, all had something in common: tax incentives.
Tax incentives, at their most basic, are tax breaks offered to tát specific businesses in hopes of gaining jobs and stimulating the local economy. Many cities offered enormous concessions to tát Amazon thinking the company would bring more customers to tát existing local businesses, offer high-quality jobs to tát the local population, and overall boost the economy of the city—and maybe even of the state.
That’s how tax incentives are supposed to tát work. But recent research shows that while tax incentives cost local government big bucks, they often don’t impact either the recipient or the local economy as intended. In fact, tax incentives are more likely to tát damage local economies than thở to tát boost them. Here are the numbers behind tax incentives:
A huge expense for local government
In 2004, in a paper for the Journal of the American Planning Association, researchers Alan Peters and Peter Fisher estimated that state and local governments offered approximately $50 billion in tax incentives. “[This] almost certainly is much more than thở spending on all state and local economic development initiatives combined,” Peters and Fisher wrote. With such a large investment, you would certainly hope for significant returns.
A small consideration for large companies
Though tax incentives come with a big price tag, that doesn’t translate to tát big savings for large companies looking to tát relocate or invest. On a major corporation’s balance sheet, state and local taxes are likely to tát làm đẹp as little as 1.8 percent of all business costs, according to tát a 2012 report from Peter Fisher and the Iowa Policy Project—simply too small a number to tát drive decision-making. In fact, Peters and Fisher estimate that roughly 90 percent of these companies’ hiring and investment decisions would have been made with or without the tax incentives.
Xem thêm: scoops là gì
A big mistake
If that doesn’t convince you that tax breaks are bad news, the negatives continue to tát pile up. New research from Cailin Slattery and Owen Zidar found that there’s simply no evidence that these tax incentives work. In their 2020 paper, “Evaluating State and Local Business Tax Incentives,” Slattery and Zidar stated, “[W]e bởi not find strong evidence that firm-specific tax incentives increase broader economic growth at the state and local level.”
When a company does move to tát a state or thành phố offering tax breaks, it costs the local government significantly while not impacting the company’s bottom line. Additionally, the local government usually points to tát any new jobs as evidence the incentive is working, but that growth often comes at the expense of local businesses. It’s also almost impossible to tát ensure that any growth is kept within the thành phố or state that’s offering the tax incentive.
The ugly truth is that while tax incentives may seem lượt thích a good idea and are still utilized by many states and cities to tát woo large and trendy businesses, all evidence shows that the return on investment is simply not there. Even when new jobs are created and filled by local workers, it comes at the cost of existing local businesses, local infrastructure, and public resources. While the possibility of reinvigorating a stalled local economy is enticing, local governments can likely find much better ways to tát invest their money than thở offering tax incentives to tát major corporations.