Businesses pay property for a reason. They get fire and police protection. They get roads paved. They get streets plowed. They get to plug into infrastructure. Governments rely on businesses to get revenue. Yet property tax breaks have become ubiquitous and governments are now hurting for revenue.
It’s time to rethink property tax abatements, according to a new study. The Lincoln Institute of Land Policy found throwing property tax incentives at businesses is bad public policy:
Three major obstacles can impede the success of property tax incentives as an economic development tool. First, incentives are unlikely to have a significant impact on a firm’s profitability since property taxes are a small part of the total costs for most businesses—averaging much less than 1 percent of total costs for the U.S. manufacturing sector. Second, tax breaks are sometimes given to businesses that would have chosen the same location even without the incentives. When this happens, property tax incentives merely deplete the tax base without promoting economic development. Third, widespread use of incentives within a metropolitan area reduces their effectiveness, because when firms can obtain similar tax breaks in most jurisdictions, incentives are less likely to affect business location decisions.
The authors say states should restrict property tax breaks to distressed geographic areas and certain types of projects. They say governments should actually study if property tax breaks are effective. They also suggest other kinds of government support, such as job training and regulatory relief.
The study found tax breaks for retail and housing developments don’t increase income or employment. But we continue to subsidize projects like College Town and the Greece Ridge Mall.
Links of the Day:
– Riding along with police during the Dave Matthews concert at Darien Lake is a riot.
– Carl Paladino filed a lawsuit accusing the Buffalo school board of appointing the new superintendent in secret.
– They were the state’s original double-dippers. Slave owners who charged their slaves to buy freedom while collecting compensation from the state.
– Albany restaurants are fretting that the state may end lawmakers’ allowances for travel and food.
– The video of San Diego accidentally setting off all of its fireworks at once is insane.