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Tax incentives to bring in high-tech jobs don't work

January 14, 2010

That's the conclusion of Good Jobs First, a left-side public policy group. The study, co-authored by University of Iowa professor Peter Fisher, draws this conclusion:

High-tech job creation (or loss) is overwhelmingly driven by events within the state—not by interstate relocations.

An analysis enabled by a relatively new proprietary data set, the National Establishment Time Series (NETS), finds that Pennsylvania’s interstate in-migration (or out-migration) of high-tech jobs is dwarfed (by a factor of 28 over 16 years) by the impact of business-establishment births, deaths, expansions and contractions. Whether positive or negative, the net movement of high-tech firms and jobs across the state’s borders each year is almost negligible compared to the impact of instate activity. Long term, interstate movements have been nearly a wash: over the same period, the state experienced a very small net in-migration of workplaces and a very small net out-migration of jobs.

While businesses that shake down states for subsidies get a lot of press, as do the politicians who enable them, the real economic development occurs outside of the corporate welfare system. This tends to vindicate the Tax Foundation model of few or no subsidies, simple and broad-based taxes, and lower rates. It also implies that Iowa's system of 30-odd "targeted" subsidies should be scrapped and replaced by something like The Tax Update Quick and Dirty Iowa Tax Plan.

Via the TaxProf. David Brunori has more at Tax.com.

Links:

Summary
Full Study