Media Review – Use of Tax Incentives

Latest Discussions on the Use of Incentives

Since Louise Story published her article in the New York Times, the use of incentives in economic development has become a very hot topic. Central to the issue is determining (or assuring) a positive taxpayer return on investment.

I have also written several blog posts on the subject. My goal was to be thought-provoking, so hopefully you will read them.

Do Executives Prefer Incentives or the American Dream?

A Call For Tactical Transparency

Interview with SmartIncentives Founder Ellen Harpel

Economic Incentives – Classic Prisoner’s Dilemma

How to Win – Time to Market or Incentives?

Because this is such a trending topic, I thought it might be helpful to save you time and put together a list of articles that provide a reasonable flavor for the discussion. This is a representative list, not a comprehensive one. I apologize in advance if a major article worth noting has escaped my review and would encourage you to provide a link to the missing article in a comment. I promise to read it and sharing the link will enrich the overall educational experience for all readers.

Representative Article List

Securities & Exchange Commission Suggest Fresh Tax Incentives to Companies

Article Discussing Bass Pro Group Taxpayer Subsidies

Ken Griffin Calls Illinois Tax Incentives Cronyism

Apple Avoided Taxes on Overseas Billions

Minnesota Tax Proposal Could Cut Charitable Giving

Sweet Land of Subsidy

Clawback Blog

GFOA Publications

Area Development Survey – Changing Site Selection Priorities

Governor Scott Critical of $20M Paid to Florida Company

Incentives May Require Tax Hike

A New War Between The States

A Stealth Tax Subsidy For Business Faces New Scrutiny

Publicly Financed Incentives Need Oversight to Prove Their Worth and Prevent Waste

Dozens of Tax Incentives Before Legislature

Watson Criticizes Combs, Tax Subsidy Programs

Watchdog Group Criticizes NJ Tax Incentives

Tax Incentives Only Part of The Picture for State Business Climate

The Battle in the Northeast

Discussion

As I reflect on the topic of incentives, I have three primary questions.

First, are incentives being used to offset weaknesses in a community’s promise (value proposition)? If being used in that way, would residents be better served by investing the money to fix the deficiency rather than mask it over with cash on a deal by deal basis? Is your community properly valuing the non-incentive assets it is bringing to a deal in the project financials?

Second, how can you be certain investing in incentives is delivering a positive taxpayer return on investment? Is your community even attempting to calculate it? Are there practical alternatives to offering incentives?

Is there sufficient transparency in the process that allows for proper stewardship and oversight of public funds and addresses the need for confidentiality to ensure a company is not inadvertently put at a competitive disadvantage?

I wish they could be unilaterally eliminated, but I suspect incentives will always be a tool economic development professionals and elected officials want to leverage to gain a competitive advantage (or mitigate a competitive deficiency).

What are your thoughts? Please leave a comment below.