Small Business Groups React to Study Showing State Tax Incentives Overwhelmingly Favor Large Companies

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Image: Small businesses receive only 10 percent in state incentive spending.Advocates for Independent Business (AIB), a coalition of 15 national organizations representing small businesses, welcomed the release today of new data showing conclusively that state economic development incentives overwhelmingly favor big business. The study, Shortchanging Small Business, produced by the research group Good Jobs First, examined subsidy awards in 14 states and found that 90 percent of the $3.2 billion in incentives awarded went to large firms.

“It’s stunning to see just how much state economic development programs are biased against locally owned businesses,” said Stacy Mitchell, coordinator of AIB. “We know from extensive research that small businesses, especially new and growing firms, often deliver out-sized benefits to local economies. Yet, state governments are putting these businesses at a competitive disadvantage by steering billions of dollars in public subsidies to their big corporate competitors.  We hope this report will be a wake-up call for state lawmakers.”

Of the thousands of subsidy awards that Good Jobs First analyzed, all were granted by programs that are accessible, at least on paper, to both small and large companies. In practice, however, the study confirms that these programs are biased toward big business.

As a policy solution, the report recommends that states reform their incentive rules by tightening eligibility to exclude large recipients and by implementing safeguards such as dollar caps per deal and per company. The report also notes that big tax breaks often mean little to small businesses, and that the savings from these reforms would be best spent funding public goods like infrastructure and education that benefit all employers.

The report is the second in a series of three that Good Jobs First will release this fall. See AIB’s statement on the first report, In Search of a Level Playing Field.