Tax Incentives

In Kansas City’s metropolitan area, there is a long history of businesses crossing the Kansas-Missouri border — lured by one of the two states’ tax breaks and financial incentives. “It’s a zero-sum game when incentives are given to move a company just a few miles from where it was,” says Rep. Kristey Williams, a member of the Kansas House Commerce, Labor and Economic Development Committee. “Essentially, taxpayers lose.”

Could this traditional type of interstate competition be replaced by an interstate collaboration, or cease-fire?
Smaller- and large-scale ideas were being proposed in the nation’s state legislatures in early 2019, including a bill known as the “border war bill” in Missouri. Passed by the state Senate in late February, SB 182 would prohibit state incentives from being offered to companies located in four Kansas border counties. Kansas would have to adopt a comparable ban for SB 182 to take effect.

According to Missouri Sen. Mike Cierpot, the bill’s sponsor, the two states have “spent over $335 million shuffling businesses back and forth over state lines … by moving a matter of miles, or in some cases blocks.”

In August, Apple Inc. announced that the company would locate its new data center in Waukee, Iowa. The technology giant will receive more than $200 million in state and local tax incentives to build the $1.3 billion facility on a 2,000-acre site in the Des Moines suburb.

In September, Amazon announced its search for a second North American corporate headquarters, known as HQ2. The scale and scope of the project — the e-commerce giant is expected to invest more than $5 billion in the facility and employ up to 50,000 high-paid workers — captured not only headlines, but the attention of state and local officials.

A very public competition has ensued, and at least one Midwestern state, Illinois, is right in the middle of it.

“I’m excited about our chances for [landing] HQ2,” Illinois Rep. Mike Zalewski says. Earlier this year, he was part of an effort to reform and reinstate a long-standing Illinois incentives program known as EDGE, which is among the programs that the state could use in its pursuit.

“For every Amazon, there’s a lot more 40- or 50-person manufacturers looking to move to Illinois or to grow their business [here], and we want them to succeed,” Zalewski says. “EDGE is designed ... to help both the big fries and the small fries.”

The role of state incentives (tax credits, tax exemptions, grants, low-interest loans, etc.) has gotten increased attention in the Midwest during the latter part of 2017. In September, around the same time Illinois began making its Amazon pitch, Wisconsin was closing the deal on what lawmakers say is the biggest economic development project in that state’s history.

South Dakota legislators agreed this year to provide new tax incentives for private landowners who help protect the state’s water resources from agricultural runoff. The goal of SB 66 is to encourage the use of buffer strips that filter out nutrients and keep these pollutants from reaching a water body. 

Brownfields — former industrial and commercial sites that have been abandoned and are contaminated by pollutants or other hazardous materials — are among the hardest sites to redevelop for other business or residential purposes.