No wonder state governments around the country are using economic development incentives to attract business and jobs to their borders. Problem is, costs are soaring in the battle for business. The arms race for jobs and income is spiraling out of control, and alarmed researchers at the Federal Reserve Bank of Minneapolis have called on Congress to end the internecine conflict. Opponents charge that these giveaways divert government money from supporting traditional public goods like education, frequently cost far more than any realized benefits, misallocate resources and make everyone worse off. Tax incentives range from credits for jobs created to exemptions from corporate taxes to property tax abatements.
Financial aid includes everything from tax-exempt bonds to loan guarantees.
Employment assistance typically means the state will train a company's workers, often at a nearby community or technical college. But state and local governments have developed real professionals, people who know how to put deals together, who know how to create public and private partnerships. State competition for business is nothing new, of course. In the early years of the Republic, Massachusetts, New Jersey, Georgia and other states courted business with a variety of subsidies to spur growth in their underdeveloped economies. In the immediate post World War ll decades, as tax revenues swelled and state governments expanded, politicians doled out financial goodies to favored companies and industries.