Ineffectiveness of Targeted Subsidies

Mercatus research conclusively shows that in 75-98% of cases, subsidies do not influence a company's location or expansion decisions[5]. This means the vast majority of Idaho's incentives are wasted, providing taxpayer money to companies for decisions they would have made regardless. The studies indicate that other factors, such as workforce availability, infrastructure, and overall business climate, are far more important in location decisions than tax incentives or subsidies[6].

Even in the small percentage of cases where subsidies do influence decisions, the Mercatus research demonstrates that they often lead to suboptimal outcomes. Companies may choose less efficient locations or make investments that don't align with market demands, simply to take advantage of available subsidies. This can result in less competitive businesses in the long run and more dependent on continued government support. The studies also show that the jobs created through subsidies often come at a very high cost per job, far exceeding any reasonable estimate of the economic value created[7].

For Idaho specifically, this means that the state's heavy reliance on targeted subsidies is likely resulting in significant waste of taxpayer resources. The state's economic development strategy, centered around attracting and retaining businesses through financial incentives, is fundamentally misguided according to the Mercatus research. Instead of creating genuine economic growth, these policies are more likely shuffling existing economic activity at great expense to Idaho taxpayers.