October 2, 2015

How ‘Competitive’ Tax and Incentive Policies Hurt Small U.S. Businesses

Recently we have written about how supposedly ‘competitive’ national policies on tax and the financial sector in Britain tend to favour large multinational firms over smaller, more locally-based ones, and how they also tend to lead to less competition in markets too.
This is the result of what we sometimes call the “Competitiveness Agenda”, which pushes the idea that you have to pamper and give subsidies to mobile capital, for fear that it will flee to more hospitable jurisdictions. Of course the firms that are most able to flee (or partly flee) to foreign jurisdictions are naturally the internationally-focused ones – and that usually means larger multinational corporations. The smaller locally-focused ones, which are most wholly embedded in the local economy won’t generally flee.
The result is that this ratchets up the tendency for the big to overwhelm the small, based on factors (such as tax breaks) that have nothing to do with wealth creation and everything to do with unproductive wealth extraction.
This morning Good Jobs First in the United States have published an important new report entitled In Search of a Level Playing Field: What Leaders of Small Business Organizations Think About Economic Development Incentives. Its findings very much reflect the workings of the Competitiveness Agenda.  Its summary states:

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