In an ongoing effort to attract economic development to areas in the U.S. and remain competitive, states offer new and existing incentive programs for potential business and industry. Critics say it’s gotten out of hand and do little for the economy. Here we go again.

Supporters of incentives say the deals are crucial to keeping economies strong, especially in depressed areas. Incentives can reduce the tax burden for locating or expanding a business, of course. Yet, according to front-page editorial in yesterday’s USA Today, critics say the tax breaks and other incentives have gotten out of hand, costing taxpayers billions of dollars and doing little for the economy.

The paper reports:

Generous tax breaks given to companies that threaten to take their business elsewhere are coming under increasing scrutiny from state and local officials who say taxpayers aren’t getting their money’s worth.

“State and local governments offer about $50 billion a year in tax breaks and other economic incentives,” according to economists Alan Peters and Peter Fisher.

These days — over more than a decade, truth be told — the use of economic development incentives by states and localities to attract and retain businesses has become increasingly controversial. It’s an old issue: policymakers tiring of the economic-development competition and all the incentives they’re forced to offer.

In fact, upon further digging around, we found a 158-page report, prepared by the National Association of State Development Agencies back in 1999 for the U.S. Department of Commerce, that noted:

A fundamental challenge facing the practice of economic development may well be controlling expectations about the impacts of incentive investments. In many places, political pressures and haphazard measurement approaches have resulted in elected officials and the public having very high expectations for the impacts of their projects. In fact, rigorous research on incentive impacts has found positive, but limited, impacts from many incentive investments.

“Property tax breaks to manufacturers appear to boost industrial employment for a short time,” yesterday’s editorial noted John Anderson, a University of Nebraska College of Business economist and former Michigan economic developer, as having said.

“But the impact of incentives dissipates quickly, so in a few years, there’s no benefit to employment,” Anderson said.

Critics also point to “an entitlement mentality” about tax breaks in the United States today. “Every developer thinks it’s his right not to pay property taxes,” said Kansas City, Mo., Mayor Mark Funkhouser, who was elected mayor in May after campaigning against tax breaks to developers.

Moreover, some critics say tax breaks take money from services that make a local economy successful. Think police, schools, etc.

As ShopFloor.org points out:

The odd thing is, these eco-devo incentives generally come fourth or fifth on the list of business priorities when selecting a site for a new facility. Look at the methodology from CNBC’s “Top States for Doing Business.” The top five categories for judging a business climate: Cost of Doing Business; Workforce; Economy; Education; and Quality of Life. Incentives are at most a subset of the “cost of doing business” category, but all the incentives in the world won’t attract a business to a location with a lousy workforce, shaky economy and horrible schools.

Interesting point … Either way, Arizona, Mississippi and New York are among the states apparently re-examining economic development incentives, addressed via recent local government laws or political campaigns.

New York and Hawaii remain the most expensive states to run a business, while South Dakota is the cheapest, according to a Milken Institute study released this month. Record-high rates for office space put New York high in the second spot on the think tank’s annual business-cost index, while soaring electricity costs kept Hawaii in the No. 1 spot for the third year in a row.

Breaking down expenses, the study found Connecticut had the highest wages, while Vermont had highest business taxes.

Have tax breaks and other incentives for businesses gotten out of hand? Or is this a worn-out issue from a misinformed national newspaper yet again ruffling some feathers?