Who offers tax-based business development incentives? |
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| Institution: | 1. Regional Affairs Department, Federal Reserve Bank of Kansas City, Denver Branch, 1020 16th Street, Denver, CO 80202, United States;2. Department of Economics, University of Michigan and NBER, 343 Lorch Hall, 611 Tappan Street, Ann Arbor, MI 48109-1220, United States;1. School of Computer and Information, Hefei University of Technology, Hefei 230009, China;2. Anhui Province Key Laboratory of Industry Safety and Emergency Technology, Hefei University of Technology, Hefei 230009, China;3. Department of Electrical and Computer Engineering, North Carolina State University, Raleigh, NC 27606, USA;4. College of Computer Sciences, Zhejiang University, Hangzhou 310058, China;1. Department of Engineering, University of Napoli Parthenope, Naples, Italy;2. Construction Technologies Institute, National Research Council (CNR), San Giuliano Milanese, Milan, Italy;3. Department of Structures for Engineering & Architecture, University of Napoli Federico II, Naples, Italy;1. School of Data and Computer Science, Guangdong Key Laboratory of Information Security Technology, Ministry of Education Key Laboratory of Machine Intelligence and Advanced Computing, Sun Yat-sen University, Guangzhou 510006, China;2. State Key Laboratory of Information Security, Institute of Information Engineering, Chinese Academy of Sciences, Beijing 100093, China;3. National Center for International Collaboration Research on Precision Agricultural Aviation Pesticide Spraying Technology, College of Engineering, South China Agricultural University, Guangzhou 510642, China;1. Louisiana State University, NBER and IZA, United States;2. Sam Houston State University and IZA, United States;3. Louisiana State University, United States |
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| Abstract: | Many American communities seek to attract or retain businesses with tax abatements, tax credits, or tax increment financing of infrastructure projects (TIFs). The evidence for 1999 indicates that communities are most likely to offer one or more of these business development incentives if their residents have low incomes, if they are located close to state borders, and if their states have troubled political cultures. Ten percent greater median household income is associated with a 3.2% lower probability of offering incentives; 10% greater distance from a state border is associated with a 1.0% lower probability of offering incentives; and a 10% higher rate at which government officials are convicted of federal corruption crimes is associated with a 1.2% greater probability of offering business incentives. TIFs are the preferred incentive of communities whose residents have household incomes between $25,000 and $75,000; whereas TIFs are much less commonly offered by communities whose residents have household incomes below $25,000. The need to finance TIFs out of incremental tax revenues may make it infeasible for many of the poorest of communities to use TIFs for local business development. |
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