An analysis of more than 4,200 economic development incentive awards in fourteen states finds that large companies receive dominant shares: 70 percent of the deals and 90 percent of the dollars. The deals, worth more than $3.2 billion, were granted by programs that are facially accessible to both small and large companies.
That is the key finding of Shortchanging Small Business, a study released by Good Jobs First and funded by the Kauffman Foundation and the Surdna Foundation.
“State economic development spending is profoundly biased against small, local and entrepreneurial businesses,” said Greg LeRoy, executive director of Good Jobs First and lead author of the study. “Our findings definitively confirm what many small businesspeople have long believed.”
The fourteen states where the awards were analyzed are Florida, Indiana, Kansas, Kentucky, Louisiana, Missouri, North Carolina, New Mexico, Nevada, New York, Pennsylvania, Vermont, Virginia and Wisconsin.
There is slight variation in the degree of big-business dominance among the states (80 to 96 percent of the dollars) but that is meaningless, since the programs vary as do the industrial demographics of the states. The key finding is how consistently the programs grossly favor big businesses.
The study, based on a close examination of the recipient companies, designates businesses as large or small based on their employment size as well as their total number of establishments and whether they are locally or independently owned.
“As a policy solution, we do not recommend simply reallocating deals and dollars,” said LeRoy. “These tax-break deals often mean little to small businesses. Instead, states should disqualify big businesses and use the savings to better fund public goods that benefit all employers and help small businesses with the persistent credit crunch.”
Short of disqualifying big businesses, the report recommends states spend much less on big businesses by using safeguards such as dollar caps per deal, dollar caps per job, and dollar caps per company.