State Tax Incentives May Not Boost Economy

The article is Pennsylvania Tax Incentives Questioned (WSJ, 1-13-10, P. A3). Here is the intro:

"Pennsylvania's attempts to lure high-tech companies by offering big tax incentives have brought only marginal gains, according to a new study.

The state had a net gain of 43 high-tech employers between 1990 and 2006, but a net loss of 2,850 jobs, according to the study, funded by the Pittsburgh nonprofit Heinz Endowments and conducted by the Washington nonprofit Good Jobs First."

"The study contends that the job losses show the tax incentives aren't enough to offset other factors like globalization. It said Pennsylvania's tax and incentive codes provided "little appreciable advantage or disadvantage"..."

"Richard Florida, director of the Martin Prosperity Institute at the University of Toronto, said he thinks competition among states has calmed down amid the recession because there is less to fight over. He said that while many economic-development policy makers want to use the same incentives as competing states, many academics are finding that "at best they don't work, and at worst they're counterproductive and wasteful.""

[tax incentives] have "...zero sum across all states."

"...companies could game the system by firing workers before using a credit to rehire more workers..."

"...more jobs were lost to other countries than to other states by a 30-to-1 ratio. It also found that job creation is driven more by factors in the state, such as expansion of pre-existing companies, than by interstate relocations."