Increasing the Equity and Efficiency of Tax Abatement Programs
The state role in economic development policy has increased as the federal government has devolved selected programs to balance growth and incomes among different part of the country. Rapid growth in coastal states and the suburban areas around many cities, and stagnation or decline in areas that have remained rural has intensified economic development debate. Within the broad spectrum of economic development policy, significant resources are focused on state industrial recruitment through tax abatements. This article uses the Michigan experience to illustrate how current application of tax abatements may increase geographic income inequality, and that some adjustment in the policy would be needed if policy makers want to rectify the unequal distribution of tax expenditure. We also argue that localities have few incentives to reject or limit, which can lead to overuse of the tool. Relatively straightforward countervailing measures such as a cap on per capita use of abatements, together with payments to localities that do not use their quota of abatements, could improve the effectiveness of overall state economic development policy by increasing the level of local public debate about the use of abatements and making funds available for alternatives to tax abatements.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Todd M. Gabe & David S. Kraybill, 2002. "The Effect of State Economic Development Incentives on Employment Growth of Establishments," Journal of Regional Science, Wiley Blackwell, vol. 42(4), pages 703-730.
- Margaret E. Dewar, 1998. "Why State and Local Economic Development Programs Cause so Little Economic Development," Economic Development Quarterly, , vol. 12(1), pages 68-87, February.
- Oechssler, Jorg, 1994. "The city vs. firm subsidy game," Regional Science and Urban Economics, Elsevier, vol. 24(3), pages 391-407, June.
- Nizalov, Denys & Loveridge, Scott, 2005. "Regional Policies and Economic Growth: One Size Does Not Fit All," The Review of Regional Studies, Southern Regional Science Association, vol. 35(3), pages 266-90.
When requesting a correction, please mention this item's handle: RePEc:ags:jrapmc:132970. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.