Thus, while the corn mill could be located, logically, in Iowa, the taxpayer absorbs the cost of transportation of the corn. This is a negative-sum game for the consumer who, although buying cornmeal for the same price in the supermarket, is actually paying more because his taxes have gone to fund the inefficiency of the business, by way of incentives. In addition, the inefficient location of the mill leads to unnecessary depletion of natural resources due to the extra transportation required. These businesses will need to pick up the tax burden left due to the incentive programs' offering of tax abatements. One answer is to create a more equal tax across the board.
Incentives affect the economic decisions of companies.
What might appear to be most efficient, and thereby most profitable in a free market, may be the wrong move after taxation is taken into consideration. So again we see the offering of incentives, in this case selective , or targeted tax abatements distort the efficiency that is the forte of the free market system. More waste is introduced when companies dupe the government. The Charlotte Observer found several companies abusing the system in North Carolina. Weeks later it closed a plant in a nearby city employing 150.