Designing accountable and effective economic development tax incentives : a study of corporate tax credits in Kansas
By: MATKIN, David S. T
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ArticlePublisher: Armonk : SAGE, dec. 2010Subject(s): Administração de Empresas | Política Fiscal | Incentivo Fiscal | Responsabilidade Fiscal | Tributo | Estados UnidosPublic Performance & Management Review 34, 2, p. 166-188Abstract: One of the most common economic development strategies in state government is the use of tax breaks to stimulate business investment. Every year, states forgo millions of dollars in tax revenues in the expectation that those "investments" will result in a net benefit to their economy. Critics of state tax incentives often claim that tax breaks do not affect investment decisions and, therefore, unnecessarily reduce tax revenues. Supporters contend that tax incentive programs can be effective at stimulating business development if they are properly designed. Drawing on evidence from tax incentive programs in Kansas, this article uses state corporate income tax returns and interviews with corporate officials to examine whether procedural requirements improve the accountability and effectiveness of tax incentives. The findings indicate that procedural requirements may improve the accountability of tax incentives but that they tend to reduce the likelihood that they will stimulate investment that would not have occurred otherwise.
One of the most common economic development strategies in state government is the use of tax breaks to stimulate business investment. Every year, states forgo millions of dollars in tax revenues in the expectation that those "investments" will result in a net benefit to their economy. Critics of state tax incentives often claim that tax breaks do not affect investment decisions and, therefore, unnecessarily reduce tax revenues. Supporters contend that tax incentive programs can be effective at stimulating business development if they are properly designed. Drawing on evidence from tax incentive programs in Kansas, this article uses state corporate income tax returns and interviews with corporate officials to examine whether procedural requirements improve the accountability and effectiveness of tax incentives. The findings indicate that procedural requirements may improve the accountability of tax incentives but that they tend to reduce the likelihood that they will stimulate investment that would not have occurred otherwise.
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