Do tax incentives encourage development? A new study says no
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Do tax incentives encourage development? A new study says no

  • January 13, 2020
  • News

A collection of studies coalesced by Forbe’s examines the effects of tax incentive programs on development to find out if they are producing the intended results their advocates claim. The results of the study found that on average, larger and more profitable firms are more likely to receive a tax subsidy. Firms that received subsidies had eight times as many employees as the average firm and recorded gross profits 14 times larger than average. This information supports the argument that larger and more profitable firms are getting most of the government handouts while smaller and less profitable competitors are left to fend for themselves. 

Additional findings from the study showed that there are, of course, political motivations behind some tax incentives as well. Tax incentives that draw in large businesses provide opportunities for positive publicity for elected officials green lighting the projects. Data shows that incentive spending in election years increases significantly and can effect re-election chances. Overall, the study is far from the final word on the efficacy of tax incentives but contributes to the growing body of work that says no, the incentives generally don’t stimulate broader economic development. Read more HERE.

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