Rethinking Tax Abatements

Cities across the country are reconsidering tax abatement plans, in the new belief that cities just can't afford them.

"Tax abatements – programs which allow developers, homebuyers and/or businesses to forgo paying property taxes or pay them at a reduced rate for a number of years – have been put on trial throughout the country. Houston, which has suspended its program, and St. Joseph County in Indiana, which is scaling its back, are just two of many municipalities that are carefully reevaluating the benefits of tax abatement in a time when a shrinking tax base is the primary pain of the crisis for cities. The idea is that in these times, one can only raise actual tax rates – like sales and wage taxes – so high without inducing flight, so tweaking how tax abatement is applied can be an alternative way to raise taxes without really raising taxes.

It's not clear whether or not doing anything with the programs will make a difference right now, with homeownership declining and businesses tightening their ambitions for expansion – it might deter these individuals, but they're already deterred by their own lack of money."

Full Story: When Cities Are Too Generous

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