The Enid News and Eagle, Enid, OK

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
  • Affirmative action ruling challenges colleges seeking diversity

    The U.S. Supreme Court's support of Michigan's ban on race-based affirmative action in university admissions may spur colleges to find new ways to achieve diversity without using racial preferences.

    April 23, 2014

  • A 'wearable robot' helps her walk again

    Science is about facts, numbers, laws and formulas. To be really good at it, you need to spend a lot of time in school. But science is also about something more: dreaming big and helping people.

    April 23, 2014

  • Cuba is running out of condoms

    The newest item on Cuba's list of dwindling commodities is condoms, which are now reportedly in short supply. In response, the Cuban government has approved the sale of expired condoms.

    April 23, 2014

  • The waffle taco's biggest enemy isn't McDonald's. It's consumer habits.

    Gesturing to Taco Bell, Thompson said McDonald's had "not seen an impact relative to the most recent competitor that entered the [breakfast] space," and that new competition would only make McDonald's pursue breakfast more aggressively.

    April 23, 2014

  • Screen Shot 2014-04-22 at 4.42.47 PM.png VIDEO: Leopard attacks crowd in India

    A leopard caused panic in the city of Chandrapur when it sprung from the roof of a house and charged at rescue workers.

    April 22, 2014 1 Photo

  • The top 12 government programs ever

    Which federal programs and policies succeed in being cost-effective and targeting those who need them most? These two tests are obvious: After all, why would we spend taxpayers' money on a program that isn't worth what it costs or helps those who do not need help?

    April 22, 2014

  • In cuffs... 'Warlock' in West Virginia accused of sexual assault

    Police in West Virginia say a man claiming to be a “warlock” used promises of magical spells to lure children into committing sexual acts with him.

    April 22, 2014 1 Photo

  • Cats outsmart the researchers

    I knew a lot had been written about dogs, and I assumed there must be at least a handful of studies on cats. But after weeks of scouring the scientific world for someone - anyone - who studied how cats think, all I was left with was this statement, laughed over the phone to me by one of the world's top animal cognition experts, a Hungarian scientist named Ádám Miklósi.

    April 22, 2014

  • McCain 1 House Republicans are more active on Twitter than Democrats

    Your representative in the House is almost certainly on Twitter. Your senator definitely is. But how are they using the social network? Are Democrats more active than Republicans, or vice versa? Who has the most followers on the Hill?

    April 22, 2014 1 Photo

  • Do your genes make you procrastinate?

    Procrastinators, in my experience, like nothing better than explaining away their procrastination: General busyness, fear of failure, and simple laziness are just a handful of the excuses and theories often tossed around. Now researchers from the University of Colorado Boulder have added another option to the list: genetics.

    April 21, 2014