The Best Thing States Can Do to Boost Business? Support Local Communities

10/05/2015

By Jeremy Quittner, September 29, 2015

Small business owners say the billions spent by state and local governments predominantly help big businesses, not them or their customers.

Most people tend to think that economic development plans focus on helping businesses, rather than the communities they serve.

And there's good reason for that: State and local governments spend tens of billions of dollars on business assistance each year. The help comes in the form of tax abatements, grants, low-cost loans and credits for research and development.

Yet small business owners say that state and local governments are failing them when it comes to the economic incentives they need. Instead, a new report from Good Jobs First suggests, big businesses are the ones who walk with most of the financial benefits, not small businesses. And entrepreneurs would like to change that by focusing on the people living in the locations they serve.

Good Jobs First, a national organization devoted to government accountability for economic development, surveyed 39 small business organizations. In total, the groups have 24,000 members in 25 states. The report was released on Tuesday.

Here’s what small business group leaders had to say, by the numbers:

  • 87 percent said small business interests in economic development are not represented in state capitals.
  • 85 percent believe their state’s economic development incentives don’t address the needs of small businesses.
  • More than two thirds say that traditional incentives like tax breaks are not that valuable to small business owners.

And the assistance that is there is targeted overwhelmingly to big business.

  • 92 percent believe that state spending incentives are biased toward big business, and nearly the same percentage said the incentives predominantly favor big business.
  • 79 percent believe their states are overspending on big incentives, at the expense of state finances.
  • More than three quarters says state incentives are unfair to small business owners.

Yet, summing up the problem, small business owners said they’d prefer incentives that strengthen communities, rather than targeting businesses with tax breaks or other benefits. That includes shoring up infrastructure that could help customers access their businesses more easily.

“Small business owners need more customers in their stores, purchasing the products and services that they sell,” Amanda Ballantyne, the national director for Main Street Alliance said in the report. “We need more investment in our communities, and policies that ensure that more customers have stable jobs, earn decent wages, and have access to the benefits they need to keep their families healthy and economically secure.”