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Comment by gojomo | Hacker News Reader

Current submission headline: "“no evidence” that tax incentives given to companies increased economic growth"

Such incentives usually aren't directly premised on "increased growth", but rather "local jobs" – and the linked study's abstract reports "we find that average employment within the 3-digit industry of the deal increases by roughly 1,500 jobs".

The abstract also reports "mixed" results "on spillovers and productivity effects of incentives", and "unclear" effects on "equity".

Now, I'm not a fan of such locality-vs-locality targeted-incentive competition – which is likely zero-sum or negative-sum across all localities. And without broader growth, the costs may be too expensive for the narrow employment gains.

But the current editorialized, excerpted headline makes it sound like the thrust of this study was to find no benefits at all for such deals, and that's not the mixed story it's actually reporting.

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>Now, I'm not a fan of such locality-vs-locality targeted-incentive competition, and without broader growth, the costs may be too expensive for the narrow employment gains.

I can't even see how you can theoretically expect growth from this because by definition in a common market like the US tax incentives of localities are zero sum. It doesn't really matter if jobs or growth are created in X or Y because the US has a federal government to even out imbalances anyway.

So to allow this regulatory race to the bottom within a country or a market makes no sense to me at all. Only if the firm would move abroad would there be a net loss.

Only if the firm would move abroad would there be a net loss.

Indeed, and even then: there's no net-loss for the world, just the arbitrary jurisdiction-of-reference. (And if it's not-OK to play net-destructive, negative-sum games against other localities within the same country, is it OK to play negative-sum games against other friendly countries?)

While I agree in the main, it's possible to contrive just-so scenarios where an incentive to shift economic to another locality might be net-beneficial. A struggling area might benefit more, from the same number of jobs or amount of economic activity, than a wealthier area. The wise creation of a synergistic cluster of related projects might create more follow-on benefits than a more dispersed set of activities.

But, local authorities in a bidding-war against other localities are unlikely to identify just those scenarios, and pay the efficient amount – as opposed to just trotting out these stories as self-serving rationales for self-aggrandizing favor-trading.

So to allow this regulatory race to the bottom within a country or a market makes no sense to me at all. Only if the firm would move abroad would there be a net loss.

I think part of the trouble is that tax rates are very different across different states. If the US were to ban all state and local tax incentives, then that would very much hurt high-tax states, as they'd then have fewer tools left to compete with low-tax states in attracting businesses.

If business was only about taxes, all of silicon valley would relocate to Cleveland yesterday.

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