How much do state and local economic development subsidies cost the United States every year?
It depends on how — and what — you measure. The low end estimate of specific tax subsidies and incentive programs is generally $45 billion, while other researchers looking at data coming out of new accounting requirements suggest it’s at least $70 billion. In 2012, The New York Times estimated $80 billion, and since that time incentives have only continued to grow.
As of 2020, the most recent inflation-adjusted estimate that takes the new trend of multi-billion-dollar megadeals into account is $95 billion per year. That’s the figure the CEA uses in our discussion of this issue, but even if it were $80 billion, or $70 billion, or $45 billion it would be too big a cost for what little we receive in return.
$95 billion is:
- Three times the amount we spent on economic development subsidies in 1990. These deals have tripled in size nationwide in three decades, with nothing to show for it.
- Enough to cover the entire state budgets of the 11 smallest states.
- Corporate welfare that’s three times as much as states spend on actual welfare — at least the $31.1 billion of state and federal money that states spend on the Temporary Aid for Needy Families “TANF” welfare program. (TANF provides “welfare check” cash assistance to low-income families, in addition to funding a variety of other services such as job training, Head Start, juvenile justice, youth pregnancy prevention, adoption programs and more.)
- A lot of guns and butter. Economists use “guns versus butter” as a nickname for the tradeoffs countries make between defense spending and social spending in their budgets. With $95 billion, the United States could get a lot of guns and butter by fully funding all federal food assistance programs and still having enough money left over to buy two new Ford-class nuclear aircraft carriers for the U.S. Navy every year.
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