Future Retirement Success
  • Politics
  • Business
  • Investing
  • Stocks
  • Politics
  • Business
  • Investing
  • Stocks

Future Retirement Success

Investing

Business Subsidies and State Tax Climates

by May 20, 2024
May 20, 2024
Business Subsidies and State Tax Climates

Chris Edwards

State and local subsidies and narrow tax breaks for businesses are growing. These benefits—called incentives—include grants, loans, tax credits, and tax exemptions to favored businesses investing in a jurisdiction.

It makes headlines when governments give incentives to big corporations such as Amazon. But the states routinely dish out subsidies and tax breaks to thousands of businesses of all sizes under a vast array of programs.

In researching Cato’s governor report cards, I’ve found that high‐​tax states appear to hand out the most special‐​interest breaks and subsidies. Let’s look at some supporting data.

The Council for Community and Economic Research maintains a database of 2,425 business subsidy and tax break programs in every state. New York has a tax credit for digital games businesses, Virginia has a tax credit for vineyards, California has a tax credit for cannabis businesses, and Georgia spends more than $1 billion a year on film tax credits.

We can compare the number of such programs in each state to how pro‐​growth the overall state tax climate is. The Tax Foundation (TF) business tax climate report gives the highest scores to states with the lowest rates and most neutral and simple tax systems. That is, systems that minimize burdens and are fair to all businesses.

The chart shows my regression results using the TF rank of the 50 states to explain the number of business incentive programs. The rank of “1” is the best tax climate. (The regression was highly significant with an F‑statistic of 12.7 and a t‑statistic on the rank variable of 3.6.)

States with the best tax climates have the fewest subsidies and breaks. Wyoming (TF rank #1) and South Dakota (TF rank #2) have low tax burdens, few incentives, and no corporate or individual income taxes.

The most business handouts are in Maryland, which has a poor business tax climate (TF rank #45). On Cato governor reports, I criticized former Maryland Governor Larry Hogan for pushing narrow business breaks rather than overall tax reforms.

Why are these two variables related? Some states favor a big‐​government approach that includes both high taxes and interventionist economic development. Leaders in these states favor raising taxes to increase spending, but they also want photo‐​ops at factory openings to highlight how their special‐​interest incentives are creating jobs.

Politicians in high‐​tax states know that to attract investment under a bad tax structure they need to cut special deals. At the same time, politicians in low‐​tax states know that they do not need to dish out special‐​interest benefits because their economies are booming without them.

The bottom line: if you don’t like corporate subsidies and favoritism, you should support the simple low‐​tax structures of Tax Foundation’s top‐​ranked states.

0
FacebookTwitterGoogle +Pinterest
previous post
Average British House Price Reaches Record High of £375,000
next post
Getting AI right: How automation can help manage your business finances

You may also like

Supreme Court Wrongly Upholds a Broadly Worded Speech Ban

June 23, 2023

Nippon Steel and the “National Security” Hoax

January 3, 2025

Navigating the Ma(i)ze of Mexico’s GM Corn Ban

October 22, 2023

Inflation Has Been Coming Down So Fed’s Rate...

June 15, 2023

Friday Feature: Dragonfly Academy, a Microschool Where Neurodivergent...

September 1, 2023

Not Indentured: Most H‑1Bs Starting Jobs in 2022...

June 7, 2023

Housing Deregulation as Poverty Policy

May 2, 2024

CBO Update: Medicare and Social Security Are Key...

June 25, 2024

Friday Feature: Black Minds Matter

June 16, 2023

Free Markets Did Not Fail the Middle Class

May 2, 2025

    Get free access to all of the retirement secrets and income strategies from our experts! or Join The Exclusive Subscription Today And Get the Premium Articles Acess for Free

    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    Recent Posts

    • Trump, lawmakers react after ‘big, beautiful bill’ clears Senate hurdle

      June 29, 2025
    • How Staff Can Strengthen HIPAA Compliance and Security

      June 29, 2025
    • Lotus denies plans to close Hethel factory amid US expansion talks

      June 29, 2025
    • Top university degrees lose sway as tech employers prioritise job-ready skills

      June 29, 2025
    • Government urges supermarkets to make healthy food more appealing in bid to tackle obesity crisis

      June 29, 2025
    • Senate Republicans ram Trump’s ‘big, beautiful bill’ through key test vote

      June 29, 2025

    Categories

    • Business (8,334)
    • Investing (2,081)
    • Politics (15,854)
    • Stocks (3,177)
    • About us
    • Privacy Policy
    • Terms & Conditions

    Disclaimer: futureretirementsuccess.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    Copyright © 2025 futureretirementsuccess.com | All Rights Reserved