Report: States like Kansas and Missouri talk a big game about small business, but give almost all incentives to large companies

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Politicians like to invoke the promise of small businesses in the United States, waxing a homespun ideal of the American entrepreneur hanging a shingle on Main Street.

But when it comes to allocating resources, it’s usually big companies that win the attention of policymakers.

In the case of economic-development incentives, big companies get a disproportionate share of the money pie.

Good Jobs First, a development policy think tank, published a new report on Tuesday called Shortchanging Small Business, funded in part by Kansas City’s Ewing Marion Kauffman Foundation. It found that an overwhelming percentage of big companies receive economic-development incentive awards under programs that are ostensibly open to businesses large and small.

Kansas and Missouri, the study found, are consistent with this pattern.

The Promoting Employment Across Kansas program (a better title would be Relocating Missouri Businesses to Kansas) has been used 206 times since 2010. The program lets eligible companies keep 95 percent of employee withholding taxes for new jobs created. Companies can qualify for the program if they add 10 new jobs.

The title of the program suggests that it’s used to spur business development all across the Kansas plains, but in practice, it’s used primarily to lure Missouri-side businesses in the Kansas City metro over the state line, or to keep Kansas companies from doing the reverse.

The Good Jobs First study analyzed 203 of those PEAK deals, finding that 164 (or 81 percent) went to large businesses. When translated to dollars and cents, it means those large businesses reeled in $41.6 million, or 95 percent, of the $43.9 million available under PEAK.

(The study generally defines small businesses as those with fewer than 100 employees and locally or independently owned.)

The Show-Me State has an answer to PEAK, called Missouri Works (formerly Missouri Quality Jobs). Its benefits are substantially similar to PEAK, and also often used to lure Kansas businesses to Kansas City, Missouri. To qualify, a company has to create at least two jobs and $100,000 worth of new investment, or 10 jobs and no investment.

The Good Jobs First study analyzed Missouri Works for 2013 and 2014, finding that among the 136 times it has been used, 94 have gone to large companies. That means that $42.4 million, or 89 percent of the $47.5 million outlay of the program, is lavished upon companies of greater size.

“When on average only two percent of a state’s employers have more than 100 employees, yet such firms are receiving 80 or 90 plus percent of incentive dollars, there is a deep policy mismatch that disfavors most U.S. employers,” the report says.

Read it for yourself here.

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