WASHINGTON--More than half of U.S. states have processes to regularly evaluate their economic development tax incentives, according to a new report from The Pew Charitable Trusts. How States are Improving Tax Incentives for Jobs and Growth: A national assessment of evaluation practices examines the progress that the 50 states and the District of Columbia have made to produce high-quality information on the results of their tax incentives.
Tax incentives are a primary tool that states use to try to create jobs, attract new businesses, and strengthen their economies. Incentives are also major budget commitments, collectively costing states tens of billions of dollars a year. Given this importance, policymakers across the country increasingly are demanding high-quality information on the results of tax incentives. Building on earlier Pew research, How States are Improving Incentives for Jobs and Growth identifies best practices. The report recommends that states take three steps to evaluate tax incentives effectively:
Based on these three criteria, Pew rated each state as “leading,” “making progress,” or “trailing.”
“More states are evaluating incentives with far more rigor than just a few years ago,” said Josh Goodman, of Pew’s economic development tax incentive project. “State officials are using evaluations to identify incentives that are working well and reform those that are not, and as a result, states are saving millions of dollars while achieving stronger economic results.”
Still, according to the new report, more than 20 states have yet to put a well-designed plan in place to regularly evaluate their tax incentives. Other states could improve the rigor of their analyses or take steps to ensure that lawmakers consider the findings. “With better information lawmakers can make better decisions,” says Pew’s Goodman, “and will be able to design economic development policies that serve the needs of the state’s budget, businesses, and workers.”
The Pew Charitable Trusts is driven by the power of knowledge to solve today’s most challenging problems. Learn more at www.pewtrusts.org.