Do Industrial Tax Abatements Spur Property Value Growth?

Kang, Sung Hoon; Reese, Laura A.; Skidmore, Mark

doi:10.1002/pam.21862

Cited by 8 publications

(6 citation statements)

References 55 publications

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“…Wassmer (1992) found that property tax abatements are costly for whichever jurisdiction that winds up paying for them. Kang et al (2015) found that tax abatements contribute to property value growth, but that the fiscal benefits pale in comparison to the costs. Landers (2006) found that enterprise zones raise the property value within them, but that the more of them there are, the less revenue benefits each generates.…”

Section: Literature Reviewmentioning

confidence: 99%

Do Economic Development Tax Abatements Affect School Finances?

Wen

2023

Economic Development Quarterly

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Criticisms against tax incentives typically come from either the regional inequality perspective that compares a locality with others in terms of the amount of revenues foregone or the opportunity cost perspective that compares a locality with itself in an alternate reality where it foregoes less or none. How foregone/hypothetical revenues affect collected/actual revenues and related fiscal outcomes is less understood. This article examines the association between the amount of abated taxes and school district revenues and expenditures in 2019 for the nine U.S. states that have sufficient tax abatement data for such analyses. Findings show that districts experiencing greater incentive cost burden have fewer overall revenues per pupil, depend more on local sources besides property tax, spend less on teaching salaries, and are more likely to be underfunded. Some of these effects vary by district wealth, suggesting the need to fine-tune the incentive award levels according to local conditions.

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Section: Literature Reviewmentioning

confidence: 99%

Do Economic Development Tax Abatements Affect School Finances?

Wen

2023

Economic Development Quarterly

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“…While cooperation among jurisdictions can bring tremendous benefits, competition and fragmentation can make it a very risky endeavor (Feiock, Lee, and Park 2012). Research has shown that state and local tax choices can influence industrial and other economic activity (Kang, Reese, and Skidmore 2016; Thom 2018). Thom (2018) examined state incentives to lure the motion picture industry away from California and New York, finding small and mixed effects across a series of outputs, with no effect on outcomes such as industry concentration or gross state product.…”

Section: Economic Development and Tax Policymentioning

confidence: 99%

State Tax Policy, Municipal Choice, and Local Economic Development Outcomes: A Structural Equation Modeling Approach to Performance Assessment

Hall

Kanaan

2020

Public Administration Review

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Do state policies that allow municipal governments to levy economic development taxes stimulate economic development? Texas allows municipal‐level economic development corporation dedicated local option sales taxes (LOST), effectively diverting revenue from general fund purposes exclusively toward local economic development efforts. Drawing from a performance management framework focused on policy outcomes, the authors use a structural equation model to estimate the effects of local tax choices on economic development performance. The results reveal that municipalities implementing the 4a LOST tax choice (traditional industry‐related efforts) experienced a significant and positive effect on economic development as measured through a latent construct assessing five years of growth in population, property value, and new home construction. The observed impact of tax choice, though weaker than preexisting municipal economic capacity, suggests that states and municipalities can influence economic development activity by permitting municipal choice in the allocation of tax revenues dedicated to economic development.

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“…In contrast, property tax abatements offered to ameliorate Michigan’s Industrial Facilities Tax were associated with property value increases, suggesting positive economic benefits. However, the authors noted that the estimated fiscal benefits of the property value increases were small compared with the foregone tax revenue (Kang et al, 2016).…”

Section: Background: Property Tax Abatement and Its Impactsmentioning

confidence: 99%

Impact of Property Tax Abatement on Employment Growth

Leonard

Yang

Zhang

et al. 2020

Economic Development Quarterly

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Property tax abatement incentives, used by 70% (35 states) of the states in the United States, redirect property tax revenue from the local community to firms in hopes that inducing these firms to relocate will bring economic development benefits to the local community. However, if unsuccessful, property tax abatement incentives might uniquely concentrate the costs of a failed economic incentive strategy within a single community. Using a sample of 45 industries in 43 cities, the authors examined the employment impact of property tax abatement incentives. Property tax abatement incentives were positively associated with employment growth, but only in the early years when the abatement policies were still new. The authors also explored heterogeneity in these results among industries. Property tax abatements targeting service industries, which are less likely to benefit from automation improvements, were associated with larger employment gains.

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Do Industrial Tax Abatements Spur Property Value Growth?

Abstract: Despite ongoing debate regarding the effectiveness of tax abatements, Michigan's Industrial Facilities Tax (IFT)

Cited by 8 publications

References 55 publications

Do Economic Development Tax Abatements Affect School Finances?

Do Economic Development Tax Abatements Affect School Finances?

State Tax Policy, Municipal Choice, and Local Economic Development Outcomes: A Structural Equation Modeling Approach to Performance Assessment

Impact of Property Tax Abatement on Employment Growth

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