Much like humans need food to sustain themselves, states need revenue to operate. Perhaps the most important way businesses raise revenue for states is by paying income and payroll taxes. That is why states and localities spend more than $80 billion a year on business incentives, according to a study in the New York Times.
States also use tax incentives to spur growth among existing in-state businesses and to jockey for position with other states to attract new industries. States most commonly incentivize companies to open brand new operations, relocate operations in-state from out of state and expand existing businesses. In fact, Illinois, Ohio, and Wisconsin have all recently entered into incentive agreements with at least one business to open, relocate or expand an operation in the state.
In Illinois, Rivian Automotive, a soon to be manufacturer of electric cars, received a total incentive package of over $49 million from the state to locate their new manufacturing facility there, according to the Journal Star. Rivian, which purchased an existing but vacant automotive manufacturing facility, is expected to create nearly 1,000 jobs in the state.
In addition to receiving a number of state tax incentives, the company is also receiving incentives from the local government where the plant is located, the article states.
Ohio found itself in a generally similar circumstance. The state recently awarded $360,000 in tax credits to NDC Technologies in exchange for the company relocating a major portion of their operations to Ohio from California, according to the Dayton Business Journal. The company is investing in converting its existing Ohio facility into a manufacturing facility, as well as creating over 40 new jobs and significantly increasing their in-state payroll, according to the article.
That leaves Wisconsin. The state is known for many things—the Green Bay Packers and the setting for “That 70’s Show”—to name a few. But, above all else Wisconsin is known for being cheese country. So it should be no surprise that the state has offered an incentive package to a cheese producer to expand operations.
Ellsworth Cooperative Creamery has the potential to earn a maximum of $175,000 worth of incentives from the state for expanding its operations, according to the Milwaukee Journal Sentinel. The company is set to construct a new building and create more than 10 new jobs, according to the article.
These are just three recent examples of states incentivizing business growth through their tax systems. States and businesses are sure to enter into many more incentive agreements over the course of 2017 to continue bringing in revenue.
*Continue the discussion on Bloomberg BNA's State Tax Group on LinkedIn: Are tax incentives the most important aspect for growing businesses in a state?
For more information about tax credits, check out Bloomberg BNA’s Credits and Incentives Portfolios by signing up for a free trial of the Bloomberg BNA Premier State Tax Library today.
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