An Indictment Of Tax Abatement Incentives

Tax incentives that attract specific corporations to a city, region or state make for bad economic policy, and don't cause real growth. Memphis' Payment-in-Lieu-of-Tax (Pilot) program is used in this article as a case-in-point.

1 minute read

June 10, 2006, 1:00 PM PDT

By Chris Steins @planetizen


"For decades now targeted tax incentives have been a favorite elixir of state and local politicians in depressed communities. But targeted tax incentives don't spur real growth. Quite the contrary. While across-the-board tax cuts expand economic activity, targeted tax incentives are inevitably financed at the expense of established businesses. Today's winner of a targeted tax break is tomorrow's victim of a broad increase in business taxes. Assuming, that is, that this employer sticks around...

...So, what's a city to do? The answer is surprisingly simple. Keep taxes low across the board. Don't grant favors. Cities and states that pursue nondiscriminatory reforms, like reining in taxes, debt and public spending, will enjoy the most robust growth. Remove barriers rather than trying to steer economic growth to this favored corporation or that one."

Thanks to Peter Gordon's Blog

Monday, June 19, 2006 in Forbes

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