The problem is that once one city offers a company a lucrative deal, other employers want to get in on the bonanza. JPMorgan Chase’s chief executive, Jamie Dimon, said he would watch to see which city won the beauty contest and immediately call up those lawmakers and demand the same perks. Other companies are lining up to do the same.
It’s politically difficult for city and state officials to offer incentives to one firm and not another, Timothy Bartik, an economist at the W.E. Upjohn Institute for Employment Research, told me. Like Lay’s potato chips, “you can’t hand out just one,” as he put it. He fears that after the hysteria over Amazon’s HQ2 and the recent $4.1 billion deal struck between the state of Wisconsin and the Taiwanese electronics company Foxconn, incentive amounts will only climb.
Unfortunately, incentives and tax breaks don’t work. Research by Mr. Bartik indicates that there is not a large correlation between a state’s giveaways and its unemployment rate or income levels. And they’re often poorly targeted; you would expect better offers for companies that can promise higher wages, but the packages don’t actually vary from company to company very much.