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STATE ECONOMIC INCENTIVES: A LOSERS GAME?

February 27, 2007

Two maps say something about state tax incentives for economic development: they're for losers.

First: a map of state investment tax credit policies:

(Source: Chirinko and Wilson, State Tax Investment Incentives: A Few Facts. Tax Notes, 2/26/2007 ($link))

Next: a map of state economic growth:

(Source: Bureau of Economic Analysis)

While state investment tax credit policies aren't a perfect indicator of state economic development tax credits, they'll work as a rough indicator. You'll see that the incentives tend to cluster among the states with the weakest economic growth. Only one strong growth state (dark blue in the second map) - mighty Idaho - has an investment tax credit. Lots of the weak growth (yellow) states do.

The moral? You can't grow the economy of your whole state by taxing your existing businesses to lure and subsidize their competitors. Maybe you should try instead to make your state a good place for everyone to do business - not just those with the lobbyists and tax consultants to bag investment credits.

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