Analysis

State Tax Incentive Evaluation Ratings

Tax incentives—including credits, exemptions, and deductions—are one of the primary tools that states use to try to create jobs, attract new businesses, and strengthen their economies. Incentives are also major budget commitments, collectively costing states billions of dollars a year.  Given this importance, policymakers across the country increasingly are demanding high-quality information on the results of tax incentives.

Staff members of The Pew Charitable Trusts have assessed each state on the extent to which it has taken three steps to successfully evaluate tax incentives: making a plan, measuring the impact, and informing policy choices. These criteria were selected because they lead to regular, high-quality analyses that lawmakers use to improve the results of the state’s economic development efforts.

These ratings, originally published in May 2017, will be updated as state practices change. For more details on the rating criteria, see Pew’s May 2017 report “How States Are Improving Tax Incentives for Jobs and Growth: A national assessment of evaluation practices.”

Note: Leading states have well-designed plans to regularly evaluate tax incentives, experience producing quality evaluations that rigorously measure economic impact, and a process for informing policy choices. States that are making progress have made a plan by enacting a policy that requires regular evaluation of major tax incentives. Trailing states lack a well-designed plan to regularly evaluate major tax incentives.

Source: Pew analysis based on interviews with state officials and a review of tax incentive evaluations and evaluation statutes


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