Economic Development Incentives Challenged

is reporting that an Ohio case challenging the practice of offering state and local tax incentives to lure or keep businesses may soon go to the Supreme Court. The 6th Circuit Court of Appeals has thrown out Ohio’s tax credit program. Sen. George Voinovich, R-Ohio, has introduced legislation in Congress to allow incentives. Gov. Mark Warner, in his role as Chairman of the National Governors Association, has written in support of Voinovich’s proposal.

This could be big, affecting 40 states, including Virginia.

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  1. Anonymous Avatar

    This is a tough one. Are economic incentives shifting deckcahirs on the Titanic, or do they really stimulate new growth that increases our ability to collect taxes in the future, to pay for the incentives?

    Is it a reasonable job of government to promote citizens who live in one area over those who live in another?

  2. Jim Bacon Avatar
    Jim Bacon

    Incentives for a state like Virginia are a necessity if other states are offering them. If the Supreme Court disallows them, then all states and localities benefit because they no longer have to engage in bidding wars for business. The only losers are those businesses that dangle the prospect of locating in a region–or the threat of relocating–to extract tax breaks and subsidies not available to other businesses.

    I don’t know what the legal issues are, but from an economic perspective, we should all hope the U.S. Supreme Court strikes down this pernicious practice.

  3. Anonymous Avatar

    Amen, Jim!

  4. Will Vehrs Avatar
    Will Vehrs

    Should these incentives be struck down, wide swaths of economic development staff would either be superfluous or would be available for re-deployment to other functions, such as helping nurture start-up and early-stage companies with promise.

    Likewise, the money spent on incentives would either flow back to the treasury or could be used in other, constitutional ways to assist economic development.

    The big gainer could be worker training programs.

  5. Jim Bacon Avatar
    Jim Bacon

    Will, If the incentives are struck down, economic development staff can still focus on marketing — they’ll just have a more even playing field. I don’t see the jobs of most E.D. professionals changing very much… Not to say that they shouldn’t also be doing the things you suggest as well.

  6. Sheila Avatar

    I have to admit that it is very tempting to root against ANYTHING that Voinovich supports…

    Paybacks suck, eh Senator?!

    Immature I know, yet oddly satisfying 🙂

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