Tax Incentives To Lure Businesses

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Local governments and to a lesser extent state governments, often offer businesses tax breaks if the business will locate in their jurisdiction. The local governments want more jobs and a larger long term tax base. Often, however, the businesses leave as soon as the tax breaks expire. This Race to the Bottom fight between localities trying to boost their own economies is a major cause of Corporate Welfare.

Businesses also consider the overall tax environment when choosing which state they will locate in, and this influences state tax policy. While I do not agree with the bottom line conclusions reached by the Tax Foundation regarding which states are or are not most business friendly in their tax systems, the back up data provided in their report on the topic is a useful survey of state and local taxation of business in the United States.

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