Large Companies Claim Majority of Economic Development Deals, Dollars

Despite the important role that small- and medium-sized businesses play in job creation and economic growth, economic development incentives are consistently awarded to large companies, according to a report by Good Jobs First with support from both the Surdna Foundation and the Ewing Marion Kauffman Foundation. In an analysis of more than 4,200 economic development incentive awards from 16 programs across 14 states, large companies received anywhere between 80 percent and 96 percent of total dollar values.

In Shortchanging Small Business: How Big Businesses Dominate State Economic Development Incentives, programs were chosen for analysis based on three criteria: no to low barriers to entry, meaning that the program must require no more than 10 new jobs or $100,000 in investment; available data over a five-year period that is captured in Good Jobs First’s Subsidy Tracker; and, variation across states. For the purposes of the report, large businesses are defined as those with more than 100 employees, a company of any size that has 10 or more establishments, or is not independent or locally owned. In total, $3.2 billion in incentives were analyzed.

Reallocating these types of tax-break deals would mean little for small businesses. As an alternative, states should reform their incentive rules by tightening eligibility to exclude large recipients, or at the very least, implementing safeguards such as dollar caps per deal, dollar caps per job and dollar caps per company, according to the report,. States could then use the resulting savings to better fund public goods (e.g., education, transportation, and job training) that benefit all employers and small businesses.

Access the full report at: http://www.kauffman.org/~/media/kauffman_org/research%20reports%20and%20covers/2015/10/shortchanging_small_business.pdf