The Problem:

Corporate subsidies disproportionately flow to large, politically connected corporations. A 2015 study of incentives in 14 states by Good Jobs First found that 90 percent of the money went to large corporations.[1] This gives them an unfair advantage over smaller, more local or regional businesses. Meanwhile, those local or regional businesses are forced to subsidize the entrenchment of their own dominant competitors through their own tax dollars, even as local businesses keep more money in the economy, hire more local workers, and are more civically engaged.[2]

For example, Amazon has collected more than $4 billion in state and local subsidies, most of which has gone to build out its warehousing and logistics network.[3] It then uses that network to undermine local retail and extract fees from third-party sellers on its own platform.

The Policy:

Policymakers should cap the size of firms eligible for economic development programs, as well as the overall money that can be expended under the program or the cost per job created, in order to focus resources on small local businesses. For example, size could be limited to firms with fewer than 25 employees, and costs limited to $5,000 per new job created.

Model bill: New York, A3077, 2022

Notes:

[1] LeRoy, Greg, Carolyn Fryberger, Kasia Tarczynska, Thomas Cafcas, Elizabeth Bird, and Philip Mattera, “Shortchanging Small Business: How Big Businesses Dominate State Economic Development Incentives,” Good Jobs First, Oct. 2015, https://www.goodjobsfirst.org/sites/default/files/docs/pdf/shortchanging.pdf.

[2] Institute for Local Self-Reliance, “Key Studies: Why Independent Matters,” https://ilsr.org/key-studies-why-local-matters.

[3] Good Jobs First, Amazon Tracker, https://goodjobsfirst.org/amazon-tracker.