Most of the "incentive" situations are not a choice between those two scenarios, they are a choice between having the business there and giving them an (initial) tax break, or having the business go elsewhere. It's a choice between collecting discounted taxes, or none at all, not discounted vs. non-discounted.
It's a typical prisoners' dilemma failure. The states ought to band together and pledge not to give out these tax breaks. Since they're all deciding independently, the incentive to defect and offer a tax break is high.
What happens is that the jobs up and move as soon as the subsidy ends.
There has been quite a bit of research done on these kinds of tax subsidies and they almost always cost more than doing nothing and not getting the jobs.
