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The Relationship between Tax Increment Finance and Municipal Land Annexation

  • Mark Skidmore
  • David Merriman
  • Russ Kashian

We use detailed information from Wisconsin municipalities on annexation and tax increment finance (TIF) activity over the period 1990–2003 to determine whether TIF has encouraged annexation. Declaring a recently annexed area a TIF district increases the fiscal benefit of annexation since it allows the municipality to direct the incremental revenue increases from overlying governments to economic development activities within the newly formed TIF district. Our analysis suggests that TIF is responsible for as much as 119 square miles, or 54%, of all the land area annexed over the 1990–2003 period in Wisconsin.

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Article provided by University of Wisconsin Press in its journal Land Economics.

Volume (Year): 85 (2009)
Issue (Month): 4 ()
Pages: 598-613

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Handle: RePEc:uwp:landec:v:85:y:2009:i:4:p:598-613
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  1. Byrne, Paul F., 2005. "Strategic interaction and the adoption of tax increment financing," Regional Science and Urban Economics, Elsevier, vol. 35(3), pages 279-303, May.
  2. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-in-Differences Estimates?," The Quarterly Journal of Economics, MIT Press, vol. 119(1), pages 249-275, February.
  3. Brueckner, Jan K., 2001. "Tax increment financing: a theoretical inquiry," Journal of Public Economics, Elsevier, vol. 81(2), pages 321-343, August.
  4. Austin, D. Andrew, 1999. "Politics vs Economics: Evidence from Municipal Annexation," Journal of Urban Economics, Elsevier, vol. 45(3), pages 501-532, May.
  5. Anderson, John E., 1990. "Tax Increment Financing: Municipal Adoption and Growth," National Tax Journal, National Tax Association, vol. 43(2), pages 155-63, June.
  6. John E. Anderson & Robert W. Wassmer, 2000. "Bidding for Business: The Efficacy of Local Economic Development Incentives in a Metropolitan Area," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number bb.
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