The states are engaging in fierce competition amongst themselves to keep and attract business and industry. Economic development incentives (“EDI”), which include tax breaks and other economic incentives not generally available to local businesses, are used to induce companies to stay and expand locally or to bring new businesses to the state. Opponents of EDI are attacking in court. The principal legal issue is whether local EDI violate the Dormant Commerce Clause. At the same time, both opponents and proponents of local EDI are urging Congress to intervene, under the congressional commerce power, either to limit local EDI or to federally protect and encourage them. An important legal issue concerning such congressional action is whether the Commerce Clause empowers Congress to regulate local EDI. This Article outlines the legal framework for analyzing these issues. The purpose, however, is not to resolve the issues but to show where, within both the legal and political frameworks, federal, state, and local officials could and should consider economic analysis. Thereafter, this Article reaches its principal purpose: to explain certain ways and means of using economic analysis to inform legal and political decision-making about local EDI.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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