Taxation-State and Local Commons^™

The Unexpected Role Of Tax Salience In State Competition For Businesses, Hayes R. Holderness

Law Faculty Publications

Competition among the states for mobile firms and the jobs and infrastructure they can bring is a well-known phenomenon. However, in recent years, a handful of states have added a mysterious new tool to their kit of incentives used in this competition. Unlike more traditional incentives, these new incentives — which this Article brands “customer-based incentives” — offer tax relief to a firm’s customers rather than directly to the firm. The puzzle underling customer-based incentives is that tax relief provided to the firm’s customers would seem more difficult for the firm to capture than relief provided directly to the firm …