Do Tax Incentives Affect Investment?

Tami Gurley-Calvez, Thomas J. Gilbert, Katherine Harper, Donald J. Marples and Kevin Daly
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Tami Gurley-Calvez: West Virginia University, tami.calvez@mail.wvu.edu
Thomas J. Gilbert: Government Accountability Office
Katherine Harper: University of Tennessee
Donald J. Marples: Congressional Research Service
Kevin Daly: Government Accountability Office

Public Finance Review, 2009, vol. 37, issue 4, 371-398

Abstract: The authors construct panels of individual and corporate income tax data from 1997 to 2004 to investigate whether the new markets tax credit (NMTC) program leads to increased investment. The authors' approach is unique in the examination of development incentives as their focus is on investor behavior instead of community-level outcomes. They use both instrumental variables and propensity score approaches to address nonrandom selection into the program. The authors' results suggest at least a portion of NMTC investment by individual investors is ``new'' investment financed through a decrease in consumption. This ``new'' investment represents an increase in investment funds available to low-income communities. On the corporate side, the authors find no change in corporate investment levels in response to the NMTC. Using survey data from the Government Accountability Office, the authors infer that corporations have most likely shifted investment funds from higher income communities to NMTC-eligible communities.

Keywords: taxes; panel data; New Markets Tax Credit; investment; community development (search for similar items in EconPapers)
Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:sae:pubfin:v:37:y:2009:i:4:p:371-398

DOI: 10.1177/1091142109332846

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