U.S. states and cities hand out tens of billions in taxpayer dollars every year to companies as economic incentives.

These businesses are supposed to use the money, typically distributed through economic development programs, to open new facilities, create jobs and generate tax revenue.

But all too often that’s not what happens, as I’ve learned after doing research on the use of tax incentives to spur economic development in cities and states across the country, particularly in Texas.

Recent scandals involving economic development programs in New Jersey, Baltimore and elsewhere illustrate just what’s wrong with these programs – and why I believe it’s time to end this waste of taxpayer dollars once and for all.
Economic development 101

Many states, counties and cities have economic development agencies tasked with facilitating investment in their communities.

These agencies undertake a variety of valuable activities, from gathering data to training small businesses owners. Yet one of their most high-profile activities is the use of tax and other incentives to entice companies to invest in their communities, generating local jobs and expanding the tax base.

Estimates of how much is spent on such incentives range from US$45 billion to $80 billion a year.

But what do taxpayers get for all this money? As it turns out, not much.