Spotlight Report

Corporate Tax Incentives: What’s the harm?

posted on in Economic Growth & Development, Spending & Taxes
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The governor and Republican members of the state legislature are advocating for a host of new incentive programs and the extension and/or expansion of others. These include, but are not limited to, proposals to expand or extend tax credits for preserving older buildings, for renewable energy, for the movie industry, and to expand the Job Development and Investment Grant (JDIG) program,2 which provides tax rebates to companies based on the amount of taxes they withhold from their employees’ paychecks.

The problem with these kinds of policies is that even though they are promoted under the rubric of “economic development” there are no sound economic arguments to be made on their behalf. In fact, economic analysis suggests that they are likely to harm consumers, investors, and entrepreneurs who are not privy to the subsidies.

Incentives-based economic policies are harmful to economic growth. By definition they transfer control over resource use from the more efficient setting of private sector resource owners and entrepreneurs to the less efficient public sector driven by the choices of politicians and bureaucrats.

Spotlight 466 – Corporate Tax Incentives

Roy Cordato is Senior Economist and Resident Scholar at the John Locke Foundation. From January 2001 to March 2017, he held the position of Vice President for Research at the Locke Foundation. He also holds the title of Lecturer at… ...

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