City incentives for big companies seen a failed development strategy

New York

WHEN New Jersey announced a US$7 billion package of tax incentives to try to lure Amazon's second headquarters to Newark, local officials saw a chance to jump-start a city that has long struggled with poverty and joblessness.

Many economists, however, saw something else: a failed development strategy that they had hoped was falling out of favour.

In their view, tax incentives are little more than corporate giveaways that divert money from education, infrastructure and other priorities that ultimately do more for a region's economy. In the past decade, those arguments seemed to be gaining traction, as state and local officials put limits on once-generous handouts.

But that restraint may be crumbling. Several locations such as Chicago and suburban Montgomery County in Maryland have offered Amazon their own nine and 10-figure incentive packages. The Taiwanese electronics manufacturer Foxconn last year persuaded Wisconsin to offer more than US$4 billion in tax credits and other inducements to build a new plant. And the next big competition could be taking shape: Apple announced plans this month for a new campus somewhere in the United States, although it said it did not plan an Amazo…