Many states have programs giving special tax breaks to businesses that expand facilities or relocate to that state. However, experts question whether such government assistance is necessary or wise.

• Pennsylvania, North Carolina and Michigan have been burned by companies that aggressively bargained for incentives, but failed to live up to their agreements.

• A three-year review of companies receiving assistance in Ohio found that eight had gone out of business despite receiving more than $1.4 million in state assistance.

• Also in Ohio, 19 other companies received almost $12 million in assistance, but only 29.2 percent of the jobs they pledged to create materialized.

Companies that relocate because of incentives may be competitors to unsubsidized local firms. In July 1995, Alabama outbid two other states for a new steel plant that will compete with an existing Alabama facility.

These programs have become expensive to state governments. For example, from 1991 to 1994 Ohio gave more than $425 million to companies agreeing to expand or locate in the state.

States claim they have to compete in the giveaway game, but a viable alternative would be to cut taxes for all businesses.

Source: Sam Staley, "Cutting Taxes Best Way Out of Business Incentive Game," Perspective on Current Issues, February 16, 1996, Buckeye Institute for Public Policy Solutions, 131 North Ludlow Street, Suite 308, Dayton, OH 45402, (513) 224-8352.