Potential Long-Term Harm

Idaho's current approach undermines the long-term health and dynamism of its economy by distorting market forces and potentially discouraging organic business growth. Mercatus research indicates that subsidies can lead to a misallocation of resources, with companies making location and investment decisions based on tax incentives rather than genuine market factors or efficiency considerations[22].

This distortion can make businesses less competitive in the long run, as they may be operating in suboptimal locations or focusing on incentivized activities rather than those that best serve market demands. Additionally, the research shows that subsidy programs can create a rent-seeking culture, where businesses devote resources to securing government favors rather than innovating or improving productivity[23].

This suggests that Idaho's heavy reliance on targeted subsidies may be undermining its long-term economic competitiveness. By distorting market forces and encouraging rent-seeking behavior, Idaho's subsidy programs could be creating an economic environment that is less innovative, less productive, and ultimately less prosperous than it could be.