“Reason To Be Skeptical” Of Business Subsidies, Bundrick Says

By Caleb Taylor

ACRE Policy Analyst Jacob Bundrick discussed state government’s track record in creating jobs with cash subsidies through the Quick Action Closing Fund in an op-ed published on January 20th in the Arkansas Democrat-Gazette.

The Quick Action Closing Fund (QACF) allows the state to provide cash grants to select entities in the hopes of attracting and retaining businesses within Arkansas. The state legislature has appropriated approximately $176 million to the QACF since it was created in 2007. The Arkansas Economic Development Commission has said the program is responsible for creating or retaining nearly 20,000 jobs in Arkansas.

In his op-ed, Bundrick references a working paper he co-authored with UCA Associate Professor of Economics and ACRE Scholar Dr. Thomas Snyder entitled “Do Business Subsidies Lead to Increased Economic Activity?” The working paper was published December 6, 2017 by the Mercatus Center at George Mason University and the academic paper this study is based on will be published in 2018 in the academic journal The Review of Regional Studies.

Bundrick and Snyder found that Quick Action Closing Fund subsidies have “no meaningful relationship” with county-level employment.

Bundrick writes in his op-ed:

“Overall, we conclude that there is reason to be skeptical of the Quick Action Closing Fund as a job creator at the county level.

Great fanfare surrounds the job announcements tied to these subsidized projects. However, focusing our attention solely on the benefits to the subsidized company ignores the costs to the local economy.

Quick Action Closing Fund subsidies are not free money. Tax dollars spent on subsidies could have been spent by taxpayers elsewhere and still have increased economic activity. Similarly, public officials could have used these tax dollars for other potentially more productive public expenditures such as highway funding.”

You can read the full op-ed here.

Bundrick is also the author of the ACRE policy review, “Tax Breaks and Subsidies: Challenging the Arkansas Status Quo”and recently participated in a panel on the use of data in economic development organized by UCA’s Center for Community and Economic Development.