Tax Incentives

[gvsusean]

I've tried to research this on my own and haven't found the information I've been searching for. Then, I realized I have the best resource on the internet  So maybe someone here can answer this: Tax incentives for businesses and for construction projects are critized for costing the tax payers money when, without the tax cuts, the building wouldnt happen at all. How can something that generates no tax increase due to incentives (no tax revenue) be any worse than nothing at all but taxed (resulting in no tax revenue)? I also have other questions but I wont post them until I feel this question is sufficiently answered. Thanks brilliant minds of UP!

[organsnyder]

A few of problems with tax incentives:

 

They punish competitors - This is more an issue for retailers and other consumer-oriented businesses rather than manufacturing. A big store (like Cabela's) promises to build a super-mega-box if they can receive 10 years of tax incentives. The non-chain store down the street, which has been dutifully paying taxes for decades, all of a sudden is faced with a competitor that not only has economies of scale, but also a government subsidy. The small store quickly goes out of business.

 

They increase infrastructure wear - A new business will cause the infrastructure to see increased use, which can be costly (especially if big trucks are involved).

 

They encourage a race to the bottom - Countless times, a business has pitted multiple jurisdictions against each other to get tax credits. This is great for the business, but not good for the communities.

 

This mostly comes from my memory of a book I read a few years ago: Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense (and StickYou with the Bill)