[stevehawk]

I don't understand why people keep downvoting this sentiment. Cities have two options:

(1) Attract a business that wouldn't otherwise come, which when it exists will attract more people that pay state/local sales taxes and increase demand for property, which in turn increases property price, which increases property taxes.

(2) Don't attract the business. . . .. nothing comes after that.

[evgen]

And once again the law of the excluded middle strikes. No, the only two options are not the ones you suggest. The other option, that you conveniently ignore, is that cities build a good infrastructure that attracts talent and the businesses come to either serve the talent or employ the talent -- no subsidy needed.

By now there must be entire libraries, or at least large warehouses, filled with case studies from HBS and similar schools that show state and municipal tax incentives are ALWAYS a bad deal for the city and state finances. The only purpose they serve is to make a politician appear effective and to enable that politician and his or her cronies to collect a bit of graft.

[jryle70]

> The other option, that you conveniently ignore, is that cities build a good infrastructure that attracts talent and the businesses come to either serve the talent or employ the talent -- no subsidy needed.

How do cities pay for that good infrastructure? either with tax revenue or debt (bond). Very often cities want to attract businesses precisely because their commercial base is in decline, with very little room to hike tax. As for debt, such a city may have low credit score making it hard to get loans, or being saddled with high interest rate.

Giving incentive to businesses allows them to stabilize long term revenue, at the same time adding local jobs. That's the theory. The reality of course include both good and bad examples of such scheme. Foxconn is a bad example.