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Jeremy Hobson: Lawmakers in Illinois will decide today if it’s smart policy to give big tax incentives to companies — like Sears or the Chicago Mercantile Exchange — in order to keep those companies in the state.
Marketplace’s Bob Moon says you can find the answer in Iowa.
Bob Moon: Trying to keep companies satisfied with tax breaks can be risky business. So says Iowa State University economist David Swenson. Companies have been awarded millions in tax incentives in Iowa. But what Swenson calls a “hefty number” — 15 in the past year — have failed to meet their promises to create or maintain jobs. Besides that, states have more important bargaining chips than tax credits to lure companies.
David Swenson: The quality of government, the quality of roads, the quality of schools — all of those things taxes pay for — they factor that into whether a place is a desirable place to locate.
Swenson says politicians like the giveaways, though, because they can claim they saved or created jobs. But at the Urban Institute’s Tax Policy Center, economist Kim Rueben argues that while the company might come out ahead, taxpayers lose.
Kim Rueben: The fact that states are offering other states’ companies big incentives to move means that for you to keep your existing jobs, you also have to pony up some money.
Rueben calls it a race to the bottom, just when state budgets can ill afford it.
I’m Bob Moon for Marketplace.
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