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How Economic Development Incentives Hurt Small Businesses

States say they want to help independent businesses, but large companies take the majority of the dollars.

By Richard Florida

It’s become a mantra across the United States: Attracting and growing small businesses is the key to creating jobs and powering economic development. Just this month, Hillary Clinton kicked off the first Democratic debate by saying, “When I think about capitalism, I think about all the small businesses that were started because we have the opportunity and the freedom in our country for people to do that.” Governors and mayors from both parties have designed programs ostensibly to help small business grow in their states and cities.

The degree to which small businesses add to the economy remains an open question. What’s without question, however, is that billions of state and local economic incentive dollars seemingly aimed at small businesses flow instead to a few large, well-established, and well-connected businesses. This is yet another example of how the rapidly growing economic-development incentive game remains a perverse and useless waste of taxpayer money.

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