Rethinking Tax Incentives

Timothy J. Bartik


The closest thing to a placebased U.S. industrial policy is state and local business tax incentives. Many current incentives are poorly designed. They cost too much, and they do too little to promote more jobs at higher wages.

Reforms are needed to rein in incentives, by targeting incentives more at high-multiplier jobs in higher-wage industries. The funds saved could be devoted to more effective policies to create local jobs, such as those in customized business services to small businesses.

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