This column was originally published on the Ball State University Center for Business and Economic Research Weekly Commentary blog.
By Michael J. Hicks
June 29, 2025
Several weeks ago, I wrote that Hoosiers should offer Gov. Mike Braun grace in his efforts to reorient the Indiana Economic Development Corp. His new board appointments—including Democrat John Gregg, union leader David Fagan, and diverse business owners—deserve applause for departing from the recent focus on real estate development.
But revamping the board is only step one. The real test lies in whether these new members will ask the tough questions their predecessors avoided about Indiana’s economic development spending—questions that reveal troubling returns on taxpayer investment.
The IEDC is more than 20 years old, and in my analysis it is among the most effective in the country at the very narrow mission of attracting business. However, you can look through the dozens of board meeting minutes without evidence of any board member asking the important questions about state economic development policy. That’s troubling.
The shift to a real estate developer approach was a huge departure from state policy, which was done with virtually zero public debate. To put this in context, imagine the Indiana Department of Transportation concentrating all road spending in one or two cities without public discussion. It is that egregious.
The governor is wise to put that episode behind us, but there are even bigger questions to ask about the IEDC and Indiana’s economic development policies. A little data will make that clear.
Indiana taxpayers spend roughly $2 billion annually on direct economic development programs while abating another $8 billion in taxes to attract businesses—over $10 billion total.
The arithmetic is devastating. We’re spending more than $10 billion yearly to generate $5.9 billion in growth—a negative return that may represent Indiana’s worst public investment.
Even accounting for local spending and programs beyond business attraction, the math doesn’t improve. Consider job creation: 15,000 jobs annually over 20 years equals roughly $650,000 in economic development spending per job. To justify that investment through taxes alone, we’d need to tax those businesses at nearly 200%.
There’s no way to make Indiana’s spending on business attraction make sense from an economic or financial standpoint. In the end, Hoosiers are paying about $1,450 per resident each year to get something like $870 in economic growth. That should be maddening to everyone who is not currently employed by a business development consultancy.
This isn’t entirely the IEDC’s fault—it reflects systemwide failure to examine results or measure return on investment. Braun’s new board has a chance to change this. They should start with basic questions: What actually causes economic growth? Are there competing theories about how growth happens, and which ones does Indiana’s approach assume? Do tax incentives create jobs or simply relocate them from other states? These foundational questions should guide their policy review.
The IEDC board should do more than a simple accounting of tax incentives and ask whether capital incentives create or destroy jobs. They should ask what our workforce development programs spend money on (Hint—It’s mostly middle school math and literacy).
The new board should also ask if IEDC policies are forcing communities to over-incentivize businesses in ways that don’t work for many places. For example, the IEDC now asks local governments for “skin in the game” in the form of additional tax abatements. This penalizes places that have already invested in quality of life.
The board should consider whether they should be picking winners and losers in both business attraction and location. The libertarian within me suggests they should not. But, if they do, taxpayers deserve to hear why they should be the ones doing so, and how they’ll make these decisions.
This could lead to a broad revamping of incentive policy—particularly in the wake of Senate Enrolled Act 1 and its deep business tax cuts.
The new IEDC board should also recommend changes to the way local and regional economic development is structured. Indiana lives with a suite of institutions and policies that look mildly innovative for 1965, but are woefully unprepared for 1995, much less 2025.
For now, credit to Governor Braun for these changes—let us look for an even more vigorous and far-reaching review of economic development in Indiana.
Michael J. Hicks is professor of economics and the director of the Center for Business and Economic Research at Ball State University. He previously served on the faculty of the Air Force Institute of Technology’s Graduate School of Engineering and Management and at research centers at Marshall University and the University of Tennessee. His research interest is in state and local public finance and the effect of public policy on the location, composition, and size of economic activity.
The views expressed here are solely those of the author, and do not represent those of funders, associations, any entity of Ball State University, or its governing body. Also, the views and opinions expressed do not necessarily reflect the views of The Indiana Citizen or any other affiliated organization.
