Economic development leaders recently discussed how tax and other business incentives are used in Maryland, Virginia and the District of Columbia. Two takeaways are:

Incentives serve a public purpose, and companies would be wise to consider the rationale and expectations underlying incentive programs. These purposes are not limited to attracting new businesses but are connected to broader economic development strategies. For example, the DC government is seeking to diversify its economy and increase hiring opportunities for DC residents. Virginia’s goals are to increase the standard of living (via good wages) across the state and to generate a positive fiscal return. The better aligned projects are with these purposes, the stronger the incentive offer is likely to be.

Second, jurisdictions will, of course, compete for major project opportunities when they come along and will make their best effort (including offering incentives) to make a compelling case for their location. Given the different tax structures in Maryland, DC and Virginia, there are real political and fiscal benefits from these business decisions that can’t be ignored. However, there is also recognition that the economic benefits are spread throughout the region and a “win” for one location still creates value for the others.

Consistent with this last point, our take at Smart Incentives is that there is little that can be done in the near-term to change the political and fiscal factors that drive incentives competition across regions, but we believe that regional impact analysis, common reporting standards and data collection could help everyone understand the real costs and benefits within and across borders.

Learn more about last week’s program here: