Posts in opportunity zones
Why states and cities should stop handing out billions in economic incentives to companies

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 JerseyBaltimore 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.

Read the rest at The Conversation.

How Opportunity Zones Can Help the South Reach Its Full Potential

Economic divergence between urban and rural economies is as much a story about the South as the struggling Rust Belt. As the Wall Street Journal highlighted in a recent feature, the South’s decades-long convergence to the rest of the country has halted since the Great Recession:

In the 1940s, per capita income in the states historians and economists generally refer to as the South — Louisiana, Mississippi, Alabama, Georgia, the Carolinas, Virginia, West Virginia, Oklahoma, Arkansas, Tennessee and Kentucky — equaled 66.3% of the national average, according to historical data reconstructed by University of Kent economist Alex Klein and The Wall Street Journal. By 2009, that had climbed to 88.9%. That was the high-water mark. By 2017 it fell back to 85.9%.

It is true that incomes in the South have stopped gaining ground on the rest of the country, but the story is more complicated. The South is also home to some of the fastest-growing cities in the country, among them Atlanta, Charlotte, Raleigh, and Charleston. While their West Coast and Northeastern counterparts have enacted restrictive zoning laws that drive up the cost of living and deter in-migration, these fast-growing metros have so far avoided that temptation and remain magnets of economic opportunity. At the same time, places outside these cities have been struck by high poverty, job loss, and other forms of social hardship, driving overall regional economic outcomes away from the rest of the country.

The self-sorting of workers from struggling towns to places offering higher wages and living standards is an important driver of national growth. Policymakers in the South should continue to facilitate the migration of workers to the booming cities of the Sun Belt, but they must also pursue smart place-based policy to assist the communities that migrants leave behind. It is not a fact of life that vast swaths of the region are destined to succumb to stagnation and lag the rest of the country, and with a careful reconsideration of longstanding economic development practices, the South can reverse their divergence and spur more broad-based growth.

Read the rest at the Niskanen Center.

It's time to get serious about helping America's struggling regions

By Samuel Hammond and Michael Myers

Despite our internet age, where a person lives and works matters more than ever before in the modern American economy. Between 2007 and 2017, 80 percent of U.S. counties experienced declines in their working-age demographic. The New York metropolitan area now accounts for over 10 percent of the nation's output, yet only 6 percent of its population. America is still the land of opportunity, but in a way that has become increasingly concentrated in a shrinking number of locations.

The contemporary success of cities has an ominous flip side. Once-thriving regions across the United States are struggling with the collapse of industries and shrinking tax bases. Cities, on the other hand, have failed to properly absorb newcomers in search of opportunity, driving up rents and exacerbating local inequality. Policymakers often treat these two kinds of inequality — inter-regional and intra-regional — as separate. But what if they are two sides of the same coin?

It’s time to get serious about the regional nature of inequality, and push the frontier of research into the issues facing struggling communities, both rural and urban. 

There’s clearly an appetite for fresh thinking in economic development policy. Consider the battle over Amazon’s HQ2, which pitted more than 230 cities and development authorities against one another, each offering more outlandish inducements than the last. In the end, Amazon settled on an affluent part of Northern Virginia, bringing the promise of major investments to one of the richest zip codes in the country. …

Read the rest at TheHill.