Real World Economics: TIF: Good example of a bad policy
By Edward Lotterman
Government has long used sundry tax breaks, in lieu of direct subsidies, to attract business or real estate developments to a particular locality. This also has been a perennial political issue.
Here in St. Paul, the use or overuse of tax increment financing came up in November’s city council elections. On the state level, similar real estate and sales tax exemptions have been used to help finance various sports stadiums and other attractive developments. And Gov. Tim Pawlenty’s JOBZ development zones were a variation on the same theme.
Film and television production in the state seems to wax and wane with the attractiveness of the Minnesota Film Board’s Snowbate program relative to similar subsidies offered by other states and provinces.
Out in Boise, Idaho, where I recently gave a talk, the regional economic development entity claims that new tax abatement incentives authorized by that state’s legislature are an important tool in drawing businesses to the area’s already vibrant economy.
These are just a few examples of a broader phenomenon that crops up as a tool — and an issue — in nearly every state and most large municipalities.
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