Reining in Business Incentives?

About the Author

Jonathan Morgan

Jonathan Morgan is a School of Government faculty member.



A short piece by the Council on Foreign Relations (CFR) adds to a growing number of calls for state and local governments to significantly limit their use of business incentives for economic development such as tax breaks, cash grants, and the like.  The CFR “Policy Innovation Memo” is titled Curtailing the Subsidy War Within the United States and it envisions a future in which business incentives are used sparingly within a framework of high transparency, greater disclosure, and increased monitoring and accountability.   The memo outlines the need for enforceable rules that would govern the use of incentives and looks to international models for inspiration and guidance.  The recommendations include: 1) requiring state and local governments to report incentives to a “federal data warehouse”; 2) state mandated cost-benefit analyses for all incentive deals above a certain amount; 3) creating regional compacts to discourage counterproductive incentive competition; and 4) stricter incentive/subsidy rules within the World Trade Organization (WTO) with greater U.S. compliance.

Sensible reforms or wishful thinking? What do you think?


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