The Debate About Tax Incentives

As part of a strategy to improve local business development, many city mayors and state governors are using tax incentives to attract new business.

Due to the economic conditions over the past few years, a lot of cities and states have experienced huge decreases in business growth and development. In an effort to get their cities and states back on track, mayors and governors across the country are developing new business tax incentive packages. These packages include tax breaks and tax incentives that help to offset the cost of training and hiring.
Florida is one of many states that has been using tax incentives to attract new business. So far these incentives have helped the state attract major companies like Time Warner. According to an article in the Orlando Sentinel, Time Warner opened a 500 person office in Tampa in 2011. In order to seal the deal with Time Warner, the state offered the company three million dollars in state and local tax incentives. By having these tax incentives, Time Warner has been able to reduce the cost of marketing their products and services.

Then you have the city of Atlanta that has used major tax incentives in recent years to attract a large number of tech based companies. Many of these companies have made commitments of adding 200 plus jobs over the next five years.

Despite the fact that tax incentive packages have proven to be effective in attracting new business, there are still some people who say that most tax incentive strategies are counter-productive. Their main argument stems from the fact that a large percentage of companies that are being given these huge tax incentives never create the high number of jobs that they initially promise. Many feel that these companies make these huge job promises in order to qualify for tax incentive packages. If this is the case, then it is probably safe to say that state and city officials know this as well. The benefits they see in this situation include the positive publicity their state will receive and also the potential to attract other companies.

Another debate that has been going on about tax incentives, is that they rob states and local cities of much needed tax dollars. For example, there are some companies who have been giving tax incentive relief for up to ten years. Because of this, many state and city residents feel cheated because they could probably get more needed services if these companies had to pay their tax bill.

The debate about tax incentives is probably going to go on for many more years to come. In the meantime, we can expect local state and city governments to continue using them to attract new business.

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