Are Incentives to Lure New Businesses Fair to Current Employers?
Job growth and spending at an existing firm should be worth just as much in incentives as new jobs and capital investment brought in from outside.


Q. I read that communities in 54 states and territories (including a few in Canada and Mexico) are vying to be the site of Amazon.com’s second headquarters, offering lavish tax breaks, up-front grants and free land to entice the Seattle-based retailer. I own a small but growing business in one of these cities, and although it’s no Amazon, I’d love—but am not likely to get—the same deal. Am I being reasonable in feeling a little resentful?
A. Yes, you are, and local officials should listen carefully to this frequent complaint from established businesses that see financial incentives showered only on newcomers.
Amazon or any other firm considering a new location should base its decision not on the freebies it can demand for itself alone, but on the general business climate of a state—a climate in which all businesses, existing and newly arrived, can thrive.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
That means a climate of low-to-moderate corporate taxes (on earnings, inventory, property and so on) and workers’ compensation costs, flexible labor laws, plus easy and speedy permitting. Thinking of its employees, a business should consider the total tax burden on their personal income and estates, too.
As for the local officials trying to lure a new business, they shouldn’t offer anything to the new arrival that they aren’t willing to offer their current businesses. Job growth and spending at an existing firm should be worth just as much in incentives as new jobs and capital investment brought in from outside. Shown proof of those new hires and capital spending, the local taxing authority can simply rebate to the growing business some of the taxes it paid the year before. Is the city offering free public land to a relocater? If so, why shouldn’t it offer the same deal to a local business that needs to expand its site, perhaps at a municipal office park or incubator?
And every incentive deal, whether to an established business or a newcomer, should include enforceable methods for recapturing public funds in the event that the promised job creation doesn’t pan out.
Have a money-and-ethics question you'd like answered in this column? Write to editor in chief Knight Kiplinger at ethics@kiplinger.com.
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Knight came to Kiplinger in 1983, after 13 years in daily newspaper journalism, the last six as Washington bureau chief of the Ottaway Newspapers division of Dow Jones. A frequent speaker before business audiences, he has appeared on NPR, CNN, Fox and CNBC, among other networks. Knight contributes to the weekly Kiplinger Letter.
-
Stock Market Today: Have We Seen the Bottom for Stocks?
Solid first-quarter earnings suggest fundamentals remain solid, and recent price action is encouraging too.
By David Dittman
-
Is the GOP Secretly Planning to Raise Taxes on the Rich?
Tax Reform As high-stakes tax reform talks resume on Capitol Hill, questions are swirling about what Republicans and President Trump will do.
By Kelley R. Taylor
-
Airbnb Host Tells What It's Like
Business Costs & Regulation This Denver pharmacist began booking her ski condo a few months after the pandemic hit.
By Emma Patch
-
Tough Times for a Family Business
Business Costs & Regulation His dry-cleaning operation was rocked by the pandemic, but he is staying optimistic.
By Emma Patch
-
IRS Gives Truckers a Tax Break in Response to the Colonial Pipeline Shutdown
Tax Breaks The tax penalty for using dyed diesel fuel for highway use is temporarily suspended.
By Rocky Mengle
-
Reliving a Harlem Renaissance
Business Costs & Regulation After a tough winter, two sisters look forward to reviving their restaurant’s business.
By Emma Patch
-
Add a VPN to Surf the Internet Safely
Technology To help you fight identity theft, consider adding a VPN.
By Emma Patch
-
Stephanie Creary: Making the Case for Diversity on Corporate Boards
Business Costs & Regulation Adding underrepresented voices can improve a company’s bottom line.
By Rivan V. Stinson
-
How We Lose When We Overlook Black Talent
Business Executives Comments from Wells Fargo CEO Charles Scharf (pictured) reflect a culture that tramples on clients’ trust and limits opportunities for people of color.
By Doug Glanville
-
Retirees, Create An Emergency Fund for Rental Property
Business Costs & Regulation Build a cushion to protect your income from an unforeseen crisis.
By Patricia Mertz Esswein