October 22, 2015
By Stephanie West, LaborPress USA
Washington, DC – Governors and state legislators routinely praise small businesses for their contributions to economic growth and job creation, but states actually give big businesses the dominant share of their economic development incentive awards.
An analysis of more than 4,200 economic development incentive awards in 14 states finds that large companies receive dominant shares: 70 percent of the deals and 90 percent of the dollars. The deals, worth more than $3.2 billion, were granted by programs that are accessible to both small and large companies. More than 500 other state incentive programs were disqualified for analysis because they have barriers to entry that exclude small businesses and favor big businesses.
That is the key finding of Shortchanging Small Business, a study released by Good Jobs First: "State economic development spending is profoundly biased against small, local and entrepreneurial businesses," said Greg LeRoy, executive director of Good Jobs First and lead author of the study. "Our findings definitively confirm what many small businesspeople have long believed."There is slight variation in the degree of big-business dominance among the states. However, the programs consistently favor big businesses.
The study, designates businesses as large or small based on their employment size as well as their total number of establishments and whether they are locally or independently owned. The 14 states where the awards were analyzed are Florida, Indiana, Kansas, Kentucky, Louisiana, Missouri, North Carolina, New Mexico, Nevada, New York, Pennsylvania, Vermont, Virginia and Wisconsin."As a policy solution, we do not recommend simply reallocating deals and dollars," said LeRoy. "These tax-break deals often mean little to small businesses.
Instead, states should reform their incentive rules by tightening eligibility to exclude large recipients. The resulting savings could better fund public goods that benefit all employers and help small businesses with the persistent credit crunch."