The Nuanced New World of Economic Development Incentives

Beyond the black-and-white debates of the past, local governments are taking strengths, weaknesses and social equity into account.

This post was originally published in Governing.

With high-profile local-government economic development deals making headlines and the availability of new transparency data on public giveaways, the tax-incentive debate is in the spotlight in a serious way. The arguments are familiar ones: On one side are those who label incentives as corporate welfare in which cities indiscriminately and unnecessarily fork over public dollars to lure potential jobs. On the other side are businesses claiming to need incentives to make deals pencil out and cities convinced that they must meet business demands to secure future growth.

But is the use of incentives really this black and white? Like most things, the truth lies somewhere in the middle. What is lacking, though, is an updated and grounded understanding that goes beyond buzzwords and mudslinging. Digging into local nuances reveals a more complex approach for how, when and why some cities use incentives that others can learn from.

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About the author: Christiana K. McFarland is NLC’s research director. Follow Christy on Twitter at @ckmcfarland.