Economic Development Incentives: Best Practices

Resources to help states improve evaluation and oversight

Economic Development Incentives: Best Practices

Economic development incentives play a central role in states’ efforts to create jobs and strengthen their economies. Pew’s research shows how states can ensure that incentives are effective and fiscally sound. 

State tax incentives
State tax incentives
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Improving Tax Incentives for Jobs and Growth

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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.

State tax incentives
State tax incentives
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State Tax Incentive Evaluation Ratings

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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.

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Issue Brief

Better Incentive Information

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Issue Brief

Economic development incentives are one of the primary tools states use to try to strengthen their economies. Every state uses a mix of tax incentives, grants, and loans in an effort to create jobs, encourage business expansions, and achieve other goals. Collectively, states spend billions of dollars a year on incentives, which can significantly affect their budgets, businesses, and economies.

reducing budget risks
reducing budget risks
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Reducing Budget Risks

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In many cases, the cost of specific state tax incentive programs has increased quickly and unexpectedly by tens or hundreds of millions of dollars. As a result, lawmakers have been forced to make difficult choices between raising taxes and cutting spending to keep budgets balanced.