Who Offers Tax-Based Business Development Incentives?

Alison Felix and James Hines

No 17466, NBER Working Papers from National Bureau of Economic Research, Inc

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 percent lower probability of offering incentives; ten percent greater distance from a state border is associated with a 1.0 percent lower probability of offering incentives; and a 10 percent higher rate at which government officials are convicted of federal corruption crimes is associated with a 1.2 percent 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.

JEL-codes: H25 H71 H73 (search for similar items in EconPapers)
Date: 2011-09
New Economics Papers: this item is included in nep-pbe, nep-pub and nep-ure
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Published as Felix, R. Alison & Hines, James R., 2013. "Who offers tax-based business development incentives?," Journal of Urban Economics, Elsevier, vol. 75(C), pages 80-91.

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Journal Article: Who offers tax-based business development incentives? (2013)
Working Paper: Who offers tax-based business development incentives? (2011)
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