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High-Tech Tax Subsidies Do Little Good
Pennsylvania’s attempts to lure high-tech companies by offering big tax incentives have brought only marginal gains, according to a new study.
The Keystone State had a net gain of 43 high-tech employers between 1990 and 2006, but a net loss of 2,850 jobs, according to the study, funded by the Pittsburgh nonprofit Heinz Endowments and conducted by a Washington nonprofit organization called Good Jobs First.
Some, though not all, of these jobs go overseas. Others go to Silicon Valley or other areas with established technology infrastructures that include potential business partners and support businesses—such as law firms—and low-cost utilities and other resources.
“I love Pennsylvania. I live and work here; it’s a beautiful state,” said Scott Testa, professor of business administration at Cabrini College in Philadelphia. “But it’s not the center of the universe as far as technology is concerned.
“That’s Silicon Valley or, to a lesser extent, the Boston area,” he added “Most tech start-ups are small anyway, so they would have a very small tax burden. High-tech companies want a good ecosystem of technology business partners, lawyers, accountants, and talent. Despite globalization, there’s something to be said for being close to the people you are going to do business with.”
Expects States to Persist
That’s why many tech companies, including start-ups, gravitate to Silicon Valley despite a high cost of living and other expenses higher than those offered through some incentive programs, Testa said.
Yet Testa expects state governments to continue to offer targeted tax breaks because they are much easier to get approved than across-the-board corporate tax cuts.
“It’s a lot easier to use a pistol than a shotgun,” Testa said.
http://www.heartland.org/article/27129/Study_HighTech_Tax_Subsidies_Do_Little_Good.html
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