Question

In a well thought out argument provide a clear and detail response to the question below: Mark sure your response meets the expectation per the syllabus in order to get full credit.

Why do you think so many city governments and states seem to "bend over backwards" to get new businesses to locate in their local economies? Indeed, many cities, counties and states offer tax breaks (e.g. promises not to impose local property taxes for up to 15 years), and some provide land free to businesses who choose to locate in their areas.

1) What concept introduced in this chapter could help explain this behavior?

2) Provide examples from your local city where these incentives have been provided. Do you also feel it was a benefit or detriment to the towns economy?

Answer 1

The state and city government offers companies billions of dollars in fiscal incentives, including cash grants, rebates, and tax credits, to entice them to relocate, expand, or stay in a specific locality.

We found that states with the most effective business-attraction programs deploy a comprehensive economic-development strategy: craft specific, measurable goals to bolster target sectors and invest in the resources (the staff, the systems, and the budget) to deliver them effectively and efficiently. Capturing the resulting set of best practices allowed us to provide a common-sense framework for successful business-attraction programs.

Many states hover around the frontier line where their ranks for incentive spending and job creation are equal. Colorado, for example, sits directly on the frontier line, as it ranked 17th in both incentive spending and total jobs created or retained. Many other states clearly perform better or worse than the pack, such as Virginia, which ranked 20th in total incentive spending but sixth in total jobs created or retained. In other words, it was able to create and retain more jobs with fewer incentive dollars: while the average US incentive spending per job over this time frame was $21,000, Virginia spent just $7,000 per job.