By Matt Kelly
A new DeVoe L. Moore Center policy brief criticizes Florida’s economic development system. Targeted industry incentives have played a prominent role in the economic development strategies of state governments for decades. In the late 1970s and 1980s, enterprise zones and tax incentives were seen as an appealing “market-oriented” alternative to New Deal and Great Society spending programs since they rely on incentives rather than mandates to spur economic development. By 2012, states spent or forewent tax revenue worth an estimated $80.4 billion annually for these programs. Florida alone spends over $1 billion annually on such programs.
Unfortunately, numerous studies have found targeted tax incentive programs have no significant impact on job creation. The consensus among academic economists is that tax incentives for specific businesses or industries do not significantly improve the state and local economies, and may in fact diminish national growth. Economic development policy should be business-friendly, but targeted industry incentives run the risk of encouraging cronyism, reducing tax revenue, and misallocating scarce resources.
To learn more about Florida’s dysfunctional economic development system, read “State Economic Development Policy Falls Short“.