Reforming State and Local Economic Development Subsidies

The Cost of Incentive Warfare

The practice of cities and states engaging in incentive warfare to attract businesses is critiqued for its negative impact on taxpayers and overall economic efficiency. The competition often leads to substantial subsidies being offered to large corporations, creating a transfer of wealth from the public to private entities, without guaranteeing long-term benefits such as job creation or economic growth. This dynamic creates a deadweight loss, as funds spent on these incentives could be better allocated to public services or infrastructure. Transparency is proposed as a key reform, allowing citizens to understand the financial costs associated with these incentives, thereby generating public pressure to reconsider and potentially reduce such practices.