Maybe this explains why 50 years of business incentives haven’t made South Dakota rich…
Future Fund grants and sales tax kickbacks make up the largest by far chunk of the corporate welfare handed out by the Governor’s Office of Economic Development. One economist says such incentives look good for the pols handing them out but don’t produce a great boost to the economy or tax revenues:
“Handing out cash incentives is easier to do, and frequently the press coverage is quite positive. It associates a governor with a job-creating project,” says Timothy J. Bartik, a senior economist at the Upjohn Institute who has studied economic development incentives for decades and who authored the recent paper. “You can see why people are attracted to this. It’s a way of demonstrating you care.”
But cash incentives have a fairly low rate of economic return. A typical state incentive generates only about $1.75 in total economic gain per $1 spent, and only about 17 cents on the dollar in terms of tax revenue, according to the paper. Currently, cash grants and tax credits account for about 85 percent of state spending on incentives, while investment in services like job training or site development only accounts for about 15 percent [Jared Brey, “A Better Way to Boost Economic Development,” Governing, 2026.10.27].
Hand out $100, get $17 back in state coffers—states would have have more money to spend on schools, roads, caps, and parks if they just quit handing out grants to corporations.
But Bartik doesn’t say kill GOED. He recommends that states (1) redirect their economic incentive handouts to actual services, like training workers and building infrastructure; (2) invest economic development dollars in distressed local labor markets (uh oh—that means places that don’t have lots of campaign donors); and (3) pair incentives with projects to build more housing, so increased economic activity doesn’t tighten the housing market and price workers out of homes. Those three reforms together can turn economic development into a fiscal gain:
Our modeling across five diverse states (North Carolina, California, Tennessee, Texas, and Michigan) shows that a program that, per dollar spent, today returns $1.75 in total benefits and 17 cents in fiscal benefits, can with these reforms instead return $10−$28 in total economic benefits, as incomes per capita rise, and $1−$3 in fiscal benefits.
If a state consistently pursues these recommended reforms over time, the long-term payoff is large. After 20 years, such reforms could provide a state government and its local governments with fiscal benefits equivalent to a 4% boost in state and local tax revenue, and provide a state’s residents with a 5% boost in state personal income per capita [Timothy J. Bartik, “How States Can Design Better Economic Development Incentives,” W.E. Upjohn Institute for Employment Research: Policy Blueprint, October 2026].
Bartik’s modeling and recommendations shouldn’t surprise: give money to corporations, and they’ll do what corporations do—make money for themselves while we pray at the altar of the false gods of trickle-down. We the People get better return on investment when we invest public dollars in public services and make things happen ourselves.