Tired of Fighting for Business, Missouri and Kansas Near Cease-Fire Over Incentives
Date Posted: June 28, 2019
Posted In: Discussion, News, Regionalism,
From The Wall Street Journal: Kansas and Missouri are nearing a truce in an economic border war that has cost hundreds of millions of dollars and created barely any new jobs.
Missouri Gov. Mike Parson, a Republican, has signed legislation that would prohibit companies from receiving tax incentives for jumping the state’s border within the Kansas City region. Kansas Gov. Laura Kelly, a Democrat, said on June 14 she was prepared to sign an executive order agreeing to the truce. The legislation takes effect only if both parties agree.
The neighboring states would agree to cease using one of the most popular tools in the economic-development toolbox: lucrative tax breaks in exchange for a promise of investment and jobs. Politicians regularly tout the number of new jobs created under such programs.
States and local governments spend approximately $45 billion annually on various economic subsidies for businesses, according to Timothy Bartik, an economist at the W.E. Upjohn Institute for Employment Research in Kalamazoo, Mich.
Concerns have mounted in recent years from some state legislators and economic development officials about the wisdom of competing for business using tax incentives. Some research has shown that economic incentives make little difference in where a company ultimately chooses to locate. Despite that, localities can end up engaging in bidding wars, pushing up the cost of new jobs.
“It’s a race to the bottom and it creates this economic cage match between cities and states all in favor of the biggest players in the market,” said Assembly member Ron Kim, who sponsored legislation in New York earlier this year that would allow neighboring states to agree not to enter into a bidding war for new business. Three other states proposed similar bills, none of which passed.
The issue was highlighted by Amazon.com Inc.’s yearlong search for a second headquarters last year that pitted more than 200 cities and states against each other. Wisconsin’s $3 billion incentive package to Taiwan’s Foxconn Technology Group for a liquid-crystal display panel factory has raised similar concerns. Several states competed for the Foxconn plant, which promises $10 billion in investment and 13,000 jobs.