Failure to Achieve Stated Goals

Academic research consistently shows that economic development subsidies fail to achieve their stated goals. They do not result in broad improvements in local and state welfare, nor are they likely to sway corporations' decisions about where to locate or expand[34]. This failure occurs for several reasons:

• The taxes or diverted funding that pays for economic development subsidies create a negative economic effect that can reduce—or even exceed—the stimulating effect of the subsidy[35].
• The average accepted subsidy is likely to change only one out of every eight corporate location or expansion decisions. This means that almost 90 percent of subsidy spending is completely wasted, failing in its primary goal[36].
• Subsidies disrupt the normal workings of a healthy market and cause economic waste by:
  • protecting privileged companies from competition, enabling less efficient production,
  • encouraging companies to make excessively risky bets,
  • motivating investment and production decisions that are suboptimal, and
  • inducing companies to pursue politically derived profits rather than focus on satisfying customers[37].

In Idaho's case, this means that the state's targeted subsidies are likely failing to deliver on their promises of job creation and economic growth. The research suggests that the vast majority of companies receiving incentives from Idaho would have made the same location or expansion decisions without the subsidies. Furthermore, by distorting market forces, these subsidies may actually be hampering the state's long-term economic competitiveness.