Mississippi

Tax Incentive Evaluation Ratings

Tax Incentive Evaluation Ratings: Mississippi

Rating: Leading

Key points:

  • Mississippi is leading other states because it has a well-designed plan to regularly evaluate tax incentives, experience in producing quality evaluations that rigorously measure economic impact, and a process for informing policy choices.
  • The first evaluation under Mississippi’s law reached valuable conclusions about the effectiveness of numerous incentives.
  • The evaluation also included recommendations for improving future studies, such as adopting a rotating evaluation cycle to allow for more detailed analysis.

Mississippi evaluation law

Year enacted: 2014.a

Who evaluates: University Research Center.

Length of review cycle: Four years.

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Mississippi has become a leader in tax incentive evaluation as a result of bipartisan 2014 legislation that requires the University Research Center (URC), an office within Mississippi’s higher education system, to evaluate the state’s economic development incentives every four years.b

In the first evaluation under the law, published in January 2016, the URC’s economists reached valuable conclusions about the effectiveness of numerous incentives using a mix of empirical analysis and common sense. For example, Mississippi has committed more than $200 million in incentives for “cultural retail attractions,” such as outlet malls, under the state’s Tourism Rebate Program. The evaluation questioned the effectiveness of this economic development strategy, noting that many of the shoppers were likely to be Mississippi residents who would have spent much of their disposable income at other in-state retailers even if the new attractions were not built. The report concluded that focusing on projects that would draw a greater share of customers from out-of-state would have a larger impact.c

The authors also acknowledged the study’s challenges and offered recommendations for how future evaluations could be improved. Faced with time constraints, the URC was not able to go into much depth on each program. In several instances, the URC was unable to measure the economic impact of incentives because of a lack of data. To address these challenges, the report recommended that state agencies such as the Mississippi Development Authority and Mississippi Department of Revenue work together to collect more information from incentive recipients and to develop consistent terminology for describing incentives.d

The URC also suggested that, rather than evaluating all incentives in a single report every four years, the center could study some programs in more depth each year.e Many states, such as Florida and Washington, have used this approach, developing rotating cycles for evaluation. This strategy does not just help evaluators produce more detailed studies of incentives, but it also helps lawmakers focus more closely on a subset of incentives each year.f If Mississippi adopted a rotating cycle, the evaluations might be more likely to lead to incentive improvements.

Endnotes

  1. Mississippi Code Ann. § 57-13-101 to 109, http://law.justia.com/codes/mississippi/2015/title-57/chapter-13/economic-development-programs-and-tax-incentives-evaluation-act-of-2014.
  2. Ibid.
  3. University Research Center, “The Annual Tax Expenditure Report” (January 2016), 69, http://mississippi.edu/urc/downloads/TER/2015.pdf.
  4. Ibid., 74.
  5. Ibid.
  6. The Pew Charitable Trusts, “Tax Incentive Programs: Evaluate Today, Improve Tomorrow” (January 2015), 2, http://www.pewtrusts.org/~/media/assets/2015/01/ statetaxincentivesbriefjanuary2015.pdf.
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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.