Corsicana Daily Sun, Corsicana, Texas

Community News Network

December 26, 2013

States should rethink big tax breaks to companies, economists say

Sometime early next year, Boeing will make one state very happy and more than a dozen others very sad. It will select the location for a new manufacturing plant to build its 777X airliner, gifting what it promises will be thousands of good-paying jobs to the winner.

Those jobs are shaping up to be one of the most sought-after economic development prizes of 2014. Every state that covets them is, at Boeing's urging, preparing a package of tax breaks and other government incentives, reaching into the billions of dollars. It's the latest example of a decade-long trend: As good jobs have become harder to find, states have approved bigger economic handouts to attract or keep individual companies.

New economic research suggests that's often not a good idea, and it implies that states could be bidding too much to attract the Boeing plant.

Two economists — Owen Zidar, a doctoral candidate at the University of California at Berkeley, and Juan Carlos Suarez Serrato, a postdoctoral fellow at Stanford University — write in a forthcoming paper that companies aren't nearly as mobile as economists have long assumed. Cutting taxes, they conclude, might not be the best way to boost firms' bottom lines and keep them around.

As Zidar put it in a recent interview, the research "throws some cold water" on the idea that higher tax rates on businesses always push companies away, whether to other states or other countries.

"Corporate taxes," he said, "aren't as bad as we thought."

Economic models have long assumed that taxing businesses hurts workers and local economies because companies can operate more or less anywhere and workers can't always move to follow the jobs.

The growing concern that any big employer could pack up and leave town has led states to approve lucrative incentive packages to attract or retain companies. Indiana recently cut corporate taxes and has aggressively courted companies from neighboring Illinois, following the example of Texas. Oregon, on the other hand, called a special legislative session last year to approve a tax-incentive package mainly targeted at retaining Nike's headquarters.

Text Only
Community News Network
AP Video
Arizona Prison Chief: Execution Wasn't Botched Calif. Police Investigate Peacock Shooting Death Raw: Protesters, Soldiers Clash in West Bank Police: Doctor Who Shot Gunman 'Saved Lives' 'Modern Family' Star on Gay Athletes Coming Out MN Twins Debut Beer Vending Machine DA: Pa. Doctor Fired Back at Hospital Gunman Raw: Iowa Police Dash Cam Shows Wild Chase Obama Seeks Limits on US Company Mergers Abroad Large Family to Share NJ Lottery Winnings U.S. Flights to Israel Resume After Ban Lifted Official: Air Algerie Flight 'probably Crashed' TSA Administrator on Politics and Flight Bans Raw: National Guard Helps Battle WA Wildfires Raw: Ukraine's Donetsk Residents Flee Senators Push to End Hamas Threat in Cease-Fire A Young Victim's Premonition, Hug Before MH17 Raw: Deadly Storm Hits Virginia Campground Death Penalty Expert: 'This is a Turning Point' Raw: MH17 Victim's Bodies Arrive in Netherlands
House Ads
Twitter Updates
Hyperlocal Search
Premier Guide
Find a business

Walking Fingers
Maps, Menus, Store hours, Coupons, and more...
Premier Guide