Recently, Amazon was considering expanding and there were many states “vying” for their business to come to their state. They were offering them incentives like tax breaks, etc. Do these incentives hurt the state? Are they balanced by the benefits to the state? Should states be allowed essentially to “bribe” business? Thoughts?

Business incentives such as tax breaks always come at an enormous cost, while cost accounting can be very hard to come up with estimates, the state’s expenditure on this program is evident because countries usually focus on attracting businesses through tax breaks without considering the budget they devote in implementing the program. Therefore the tax incentives are a drag on the state’s national economic growth. Tax incentives are not balanced by the benefits of   the state, and this is because tax breaks bring displacement rather than growth. If a company establishes in a country through the incentives that means another company suffers a loss or is displaced (Faricy, 2011). I don’t think whether offering tax incentives to new establishments is a good idea to a state, and this is because of the neglected alternatives. The amount provided as tax incentives will have to be paid somehow and most of the times that will come from a reduction in public service that industries consume each day.

References

Faricy, C. (2011). The politics of social policy in America: The causes and effects of indirect versus direct social spending. The Journal of Politics, 73(1), 74-83.