State business incentives tilt the economic playing field in favor of large, incumbent firms and thereby discourage economic dynamism. However, basic collective action problems prevent any state from unilaterally eliminating these incentives, as businesses would migrate to states that continued to provide incentives.
The author proposes a Main Street Fund that would support states that reduce their use of business incentives, while adopting evidence-based programs to promote entrepreneurship, innovation, and small business. The federal government would provide funds for any state that diverts money from its traditional economic incentives to invest in initiatives that promote a more competitive economy. These initiatives include management training for new entrepreneurs, increased occupational licensing reciprocity, investment in broadband infrastructure, and customized initiatives to support the creation and success of new businesses.