The tendency of states to try to outbid their neighbors — with business incentives or lowered tax rates — has serious consequences. Practiced among Republican and Democratic governors alike, the dog-eat-dog approach has, according to much research, caused states to squeeze their own coffers and weaken environmental regulations, while lavishing subsidies both on firms that relocate anyway, and on those that might have stayed even without incentives.
Are states failing to imagine another very basic possibility? What if, instead of persistently undercutting each other, they banded together in interstate agreements? What if they agreed on a common floor for environmental or business regulations? What if states agreed not to fish for jobs in their neighbor’s pond, or sought region-wide revenue increases that would eliminate the fear of being left behind or outgunned?
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