The price tag of economic development incentives: is it too small for citizens to care?

Abstract

This article explores the impact of property tax abatements on tax rates. Using the case study approach, the research uses data from Monroe County, Indiana, and finds that the impact of abatements on tax rates is negligible. The method consists essentially of calculating the difference between actual tax rates and hypothetical tax rates assuming abatement are not awarded. The results suggest that public officials may see in abatements a symbolic and relatively harmless policy tool for purposes of garnering political support from businesses and citizens. The article discusses these findings in light of current law suits brought against prominent abatement programs.

Identifying the Local Economic Development Effects of Million Dollar Facilities

“…There are also those who argue competition causes communities to overbid for the business and suffer the “winner's curse” (Charlton ; Christiansen, Oman, and Charlton ; Schragger ; Ulbrich ). Although Dalehite, Mikesell, and Zorn (), Goodman (), and Greenstone and Moretti () report no evidence of fiscal deterioration from incentives, numerous studies find incentives are revenue negative (Bartik ; Chirinko and Wilson ; LeRoy ; Oman ; Rodriguez‐Pose and Arbix ). In cases where the incentive or location induces a revenue shortfall, the local government must compensate either by reducing services or increasing taxes on existing residents and businesses (Diechman et al ; Figlio and Blonigen ).…”