US tax incentivisation likely to face greater scrutiny

Thursday, June 27, 2019

Subject

US tax incentives and their pitfalls.

Significance

The District of Columbia Council in May voted unanimously for a budget that cut a tax incentive for technology firms. This decision came after an audit found that the tax break for Qualified High Technology Companies cost the District 40 million dollars annually without generating expected economic activity. This move comes after Amazon’s competition for a second corporate headquarters, which prompted offers of billions of dollars from municipalities, led to growing concern over the practice of states and municipalities offering tax breaks to businesses without clear processes or oversight.

Impacts

  • The federal government may begin re-locating government departments to other areas.
  • This will be driven by a combination of high costs in Washington and political impetus from federal legislators.
  • This partly reflects the elimination of other avenues for ‘pork-barrel politics’ but could harm short-term agency capacity.
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