Tax incentive evaluation ratings

Tax Incentive Evaluation Ratings: Delaware

Rating: Trailing

Key points:

  • Delaware is trailing other states because it lacks a well-designed plan to evaluate tax incentives.
  • While the Division of Revenue has published analyses of tax incentives for many years, the process has not proved effective for rigorously measuring economic impact or informing policy choices.
  • Lawmakers may want to consider an evaluation process that includes grant and loan programs such as the Delaware Strategic Fund, one of the state’s most expensive incentives.

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Every odd-numbered year, Delaware’s Division of Revenue publishes a report on tax expenditures with data on the costs of incentives and assessments of whether they are achieving their goals.a These reports contain valuable analysis of incentives on a conceptual level, but they lack in-depth economic analysis or policy recommendations. For example, the authors discuss whether tax expenditures are consistent with principles of well-designed tax codes, such as treating similar taxpayers equally and avoiding undo administrative complexity. The reports also acknowledge that determining the extent to which incentives are changing business behavior is important for measuring their results, but they do not offer quantitative analysis of the effectiveness of the programs.b Delaware lawmakers would benefit from making improvements to the evaluation process.

Delaware also does not require lawmaker action once the Division of Revenue’s reports are released. Other states, such as Iowa, Maryland, and Washington, hold legislative hearings on new tax incentive evaluations.c Establishing a process to involve lawmakers after evaluations are published would increase the likelihood that policy improvements follow.

While the Division of Revenue’s evaluations include all tax expenditures, they do not analyze programs such as the Delaware Strategic Fund, a grant and loan program that is one of the state’s most expensive incentives. In 2010, Delaware used the fund to provide $21.5 million in incentives to Fisker Automotive to build a manufacturing plant in the state. Facing financial problems, however, the company never built the plant. Fisker went bankrupt in 2013, and Delaware has been unable to reclaim the bulk of the incentives.d

Despite that setback, economic development officials have argued that the Strategic Fund is generally working well.e An evaluation could confirm that conclusion or offer ideas for potential improvements. Designing an evaluation process that includes regular, detailed analyses of both tax and cash incentives would provide policymakers with consistent, high-quality information.


  1. Delaware Code Ann. § 29-8305,
  2. Delaware Department of Finance, “Tax Preference Report: 2015 Edition,” I-6–I-8,
  3. Iowa Code § 2.48,; Maryland Code Ann., Tax–Gen. § 1-308,; Washington Rev. Code Ann. § 43.136.065,
  4. Jonathan Starkey and Melissa Nann Burke, “For Delaware, $200M in Corporate Giveaways, Little Transparency,” Delaware Online, March 10, 2015,
  5. Alan Levin, director, Delaware Economic Development Office, prepared testimony on sunset hearing, March 12, 2015, DEDOSunsetHearingRemarks12Mar15.pdf.
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State tax incentives

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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.