Note: This document was updated in March 2016 to improve consistency across related pages and include new states that passed evaluation laws.
From 2012 to 2014, 10 states and the District of Columbia passed laws that will require regular evaluation of economic development tax incentives or will improve existing evaluation processes. Since 2014, even more states have passed such laws. (For a full list of states that have passed evaluation laws since the start of 2012, click here.) These laws stand to provide lawmakers with hard evidence on the outcomes of their incentives, information they can use to shape policies that obtain the best possible results for the states’ taxpayers and economies.
This issue brief advises states on how to design and implement these laws, so that tax incentives are evaluated regularly and rigorously and so that lawmakers can use the findings to improve economic development policy. Building on the best practices developed in the 11 jurisdictions and elsewhere, the recommendations focus on three steps states should take to improve the accountability and performance of their tax incentives:
- Make a plan: Determine who will evaluate, when, and how.
- Measure the impact: Assess the results for the state’s economy and budget.
- Inform policy choices: Build evaluation into policy and budget deliberations.