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Economy

How Cities and States Can Stop the Incentive Madness

Economist Timothy Bartik explains why the public costs of tax incentives often outweigh the benefits, and describes a model business-incentive package.
Then-Wisconsin Governor Scott Walker, President Donald Trump, and Foxconn founder and board member Terry Gou participate in a groundbreaking event for the new Foxconn facility in Mt. Pleasant, Wisconsin, in June 2018. Wisconsin offered Foxconn more than $4 billion in incentives.
Then-Wisconsin Governor Scott Walker, President Donald Trump, and Foxconn founder and board member Terry Gou participate in a groundbreaking event for the new Foxconn facility in Mt. Pleasant, Wisconsin, in June 2018. Wisconsin offered Foxconn more than $4 billion in incentives.Evan Vucci/AP

This is the first part of a two-part Q&A with economist Timothy Bartik. Read the second part here.

Recent years have seen a startling surge in the use of economic-development incentives by local and state governments. Amazon unleashed a fierce competition for its HQ2, with a number of contenders offering incentives worth billions of dollars (one package was estimated to be in the range of $8.5 billion). Before that, in 2017, Wisconsin handed more than $4 billion to the electronics manufacturer Foxconn. In 2016, Nevada gave Tesla more than $1 billion to build a battery factory, and two years earlier, Oregon gave Intel $2 billion for a new semiconductor chip plant.