News From Terre Haute, Indiana

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 | Photo Reprints
Community News Network
Latest News
TribStar.com Poll
AP Video
Police: Prostitute Linked to 2nd Death Chimp-attack Victim Lobbies Congress Obama Responds to Hecklers on Immigration FIFA Rejects Suarez Appeal Against Biting Ban Israeli-Palestinian Tensions, Attacks Escalate Kim Kardashian Hits Up Valentino Show in Paris More Immigrants Detained Along Rio Grande Thousands Attend NYC Firefighter's Funeral Art of Haitian Machete Fighting Revived Neighbors Mourn Killing of Texas Family Soft Robot Fish Lead New Wave of Robotics World Cup Final Pits Argentina Against Germany Raw: Australia Hosts Annual Beer Can Regatta Robots Gearing Up for Their Own 'World Cup' Raw: Funeral in Gaza for Family of 8 'Game of Thrones' Leads Emmy Nominees Rockets Fired From Lebanon Hit Israel Police: Prostitute Accused in Overdose Death Diaz and Segel Strip Off for 'Sex Tape' Raw: Rescuers Push Beached Whale Back to Ocean
NDN Video
LeBron James returning to Cleveland - @TheBuzzeronFOX Glee Star Becca Tobin's Boyfriend Matt Bendik Found Dead in Hotel Obama Responds to Hecklers on Immigration ScarJo Channels Marilyn Monroe Aerial fish restocking in Utah Tiny Hamsters Who Ate Burritos are Back for a Tiny Hedgehog's Party Watch Kelly Ripa Get Soaked! 'Referee' Hands Out Yellow Cards for Social Faux Pas in NYC 2014 Emmy Nominees: 8 Snub Shockers Emma Watson Is Va-Va-Voom in Valentino 7 Infamous Sports Blowouts Argentina tops Holland in World Cup semifinals News flush: Japanese toilet exhibition making a splash Emmy Nominations: What to Watch For 'Game of Thrones' Leads 66th Emmy Awards Nominations Photographic 'Proof' That LeBron Is Leaving Miami - @TheBuzzeronFOX Elephant Pool Party at The Oregon Zoo Must-See! Berry and Fallon Form Human Hamster Wheel Pilot buys pizzas for travelers delayed by storm Klose nets record, Germany rout Brazil 7-1
Parade
Magazine

Click HERE to read all your Parade favorites including Hollywood Wire, Celebrity interviews and photo galleries, Food recipes and cooking tips, Games and lots more.
  • -

     

    March 12, 2010

activity