LOCAL PUSHBACK LOCAL PUSHBACK Some counties are re-examining business tax incentives: Frederick County, Md.: May revoke a $5 million property tax break given to a biotech company that was sold and paid a top executive $140 million. Finney County, Kan.: May penalize firms that don't create promised jobs after getting tax breaks. Digg



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Facebook Generous tax breaks given to companies that threaten to take their business elsewhere are coming under increasing scrutiny from state and local officials who say taxpayers aren't getting their money's worth. Critics say the tax breaks and other financial incentives have gotten out of hand, costing taxpayers billions of dollars and doing little for the economy. "There's an entitlement mentality about tax breaks today," Kansas City, Mo., Mayor Mark Funkhouser says. "Every developer thinks it's his right not to pay property taxes." Funkhouser was elected mayor in May after campaigning against tax breaks to developers, including one for a luxury condo development in an affluent part of his city. MUSKEGON REBUILDS: Michigan city finds hope in tax breaks Supporters of incentives say the deals are crucial to keeping economies strong, especially in depressed areas. "A well-thought-out portfolio of incentives is vital to being competitive for quality projects," says Jim Fain, commerce secretary in North Carolina, which has been aggressive in providing economic assistance to companies. In March, North Carolina gave $212 million in state and local assistance over 30 years to lure a $600 million Google server operation to Lenoir. State and local governments offer about $50 billion a year in tax breaks and other economic incentives, according to economists Alan Peters and Peter Fisher. Academics say there is little evidence to show that tax breaks have a lasting effect on a local economy. Property tax breaks to manufacturers appear to boost industrial employment for a short time, says University of Nebraska economist John Anderson, a former Michigan economic developer. "But the impact of incentives dissipates quickly, so in a few years, there's no benefit to employment," he says. Among the states re-examining economic development incentives: •Arizona. The Legislature passed a law in July that limits sales tax breaks that local governments can give retailers. Cities and counties had been slashing sales tax rates to attract big chains such as Wal-Mart, Home Depot and Nordstrom. That hurt local businesses, whose customers paid the full tax. •Mississippi. Incentives given to a beef factory, which opened and closed in 2004, have become a key issue in the political campaign for state agriculture commissioner. The deal cost taxpayers $55 million. •New York. The state sent 3,000 letters in July to companies given tax breaks in exchange for promises to invest money and create jobs. The letters went to companies that failed to meet 60% of their goals. The action came after New York Gov. Eliot Spitzer ordered an audit of firms that have received tax benefits by locating in low-tax Empire Zones, the state's premier economic development program. These zones provide more than $600 million a year in tax breaks to 9,800 businesses. Funkhouser says tax breaks take money from services — such as police and schools — that make a local economy successful. "Tax breaks are like taking a painkiller to mask the underlying problem, which are quality-of-life issues," he says. Fain says government involvement is vital in a global economy. "We're competing against Ireland, Eastern Europe, Singapore, not to mention China and India," he says. "We have to use the tools that we have." Share this story: Digg del.icio.us Newsvine Reddit Facebook Conversation guidelines: USA TODAY welcomes your thoughts, stories and information related to this article. Please stay on topic and be respectful of others. Keep the conversation appropriate for interested readers across the map.