Question

1. In general, are state and local tax incentive programs effective in maintaining or attracting corporate business?

Answer 1

Ans. : * State and local government routinely offer 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.

* In the United States, based on the most recent figures, the estimated total annual value of fiscal incentives is around $90 billion.1 How can governments maximize the return on investment (ROI) for attracting businesses in an era in which state and local revenues are declining, expenditures are increasing, and capital investments are more difficult to acquire?

* We undertook outside-in research and conducted in-depth interviews with experts from successful state and local organizations that offer business-attraction programs. Then we combined our findings with lessons learned from decades of work with multiple economic-development organizations (EDOs).

* 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.

* The US economic-development landscape is changing rapidly, and businesses’ capital investments have slowed. In the first quarter of 2019, growth in private, nonresidential, fixed investment was 4.4 percent, down from 11.5 percent one year prior and from 20.1 percent in its postrecession peak.