4 Things to Know About Tax Incentive Evaluations
October 1, 2024
Every state offers companies tax incentives, a mechanism by which states agree to forgo tax revenue in the hope that the companies’ activities will catalyze new economic activity. These incentives collectively cost states billions of dollars in tax revenue each year.
But do states know how well these tax incentives are performing?
Until recently, most did not. But over the last 10 years, states have increasingly adopted practices to analyze the benefits and costs of their incentive investments on a recurring basis. Now, more than two-thirds of states — plus New York City; Washington, D.C.; and Philadelphia — regularly and rigorously evaluate incentive programs, helping policymakers determine whether incentives are meeting their intended goals.
