Tax Incentives Report: Half of States Not Evaluating Their Efficacy
Half of the states and Washington, D.C. do not have effective methods for evaluating tax incentives for economic development, according to a new report by the Pew Center on the States.
Half of the states and Washington, D.C., are "trailing behind" on effective methods for evaluating tax incentives for economic development, claims a new report by the Pew Center on the States.
The Pew report, Evidence Counts, reviewed 600 documents and spoke to almost 200 government officials to find that only 13 states are leading on evaluating their tax incentive programs. Those states include Arizona, Arkansas, Connecticut, Iowa, Kansas, Louisiana, Minnesota, Missouri, North Carolina, New Jersey, Oregon, Washington and Wisconsin. (Full disclosure: One of the study's authors, Josh Goodman, was a former Governing reporter.)
According to the report, every state has some sort of tax incentive to entice employers to locate within their borders -- potentially provided at the risk of less to spend transportation, education or other areas. Such incentives often result in "bidding wars" between states to court movie productions and major corporations.
Report authors claim that no one quite knows how much is being spent on tax incentives (it could be billions annually), but no state "regularly and rigorously tests" how well those incentives are working. With states still trying to patch their budgets, "these are mistakes states can't afford to make right now," said author Jeff Chapman in a webinar for reporters Wednesday.
The authors judged states on the scope and quality of their evaluations and how much they affect policy choices. States that were considered leaders in the scope or in the quality of their evaluations were considered leaders overall. Arizona, Iowa, Oregon and Washington were singled out for their efforts to link evaluations with policymaking.
To see how your state fared, review the report below.