Minnesota

In an article released today by a Minnesota business journal disussing biotech incentives, University of Minnesota professor Ann Markusen notes that “Tax incentives have been used for a long time, but they have exploded in recent years because states and localities feel like they’re in competition.”

Professor Markusen makes two valid points. First, tax incentives have been used for a long time. Second, states are currently in competition with each other.

But she is wrong to imply that this competition between the states is only a recent phenomenon. States have been going at with each other since our country's founding. Further, this competition does not solely occur in the purely economic arena, but also in social policy as well. As Justice Louis Brandies once remarked, "It is one of the happy incidents of the federal system that a single courageous state may, if its citizens choose, serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country."

Unfortunately, instead of competing by offering a comprehensive tax policy that encourages widespread investment, states compete with each on an ad hoc basis through tax incentives. My contention is that there is a lot of time and money wasted in this effort.