States and their subdivisions are spending hundreds of millions, or billions of dollars, in economic subsidies to businesses in the form of tax breaks, grants and low interest loans. In return, companies promise economic development, especially new jobs for the region. Few mechanisms exist to monitor the cost-effectiveness of tax expenditures, much less hold a business accountable for its promises of job creation. No one knows how much money is being spent on tax incentives, or what economic benefits the governments get in return for their money. Further, once granted, programs begun in the name of economic development are seldom revisited many run for the life span of 30-year bonds, while others operate in virtual perpetuity.
Studies find that state economies are getting a very low return on their investment.
The ratio of dollars in tax subsidies to the actual number of jobs retained or created as the result of tax expenditures is often extraordinary. Even those jobs created from tax expenditures often fall short of any measure of good jobs. Tax breaks intended to help blighted, urban areas are often diverted to suburbs. Even when companies do locate in economically underdeveloped areas, wages and benefits are often well below the state s median earnings. In addition, there is evidence across many states that after receiving taxpayer largess, subsidized businesses are using discriminatory practices that violate federal fair employment rules.