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State business tax incentives: examining evidence of their effectiveness

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  • Jennifer Weiner

Abstract

State governments commonly use business tax credits to promote economic development. Whether these incentives are successful at generating new economic activity - and whether they do so in a cost-effective manner - are important concerns, particularly in times of fiscal and economic stress. This paper explores the use and effectiveness of a selected group of incentives, namely tax credits geared toward capital investment, research and development, job creation, and film production. The paper examines the various credits offered by New England states and their structural features, and reviews and analyzes the available evidence on the effectiveness and cost-effectiveness of these types of incentives. The analysis reveals the challenges entailed in measuring the impact of business tax credits and the need for both analysts and policymakers to consider those challenges carefully when using existing studies to inform the tax credit debate.

Suggested Citation

  • Jennifer Weiner, 2009. "State business tax incentives: examining evidence of their effectiveness," New England Public Policy Center Discussion Paper 09-3, Federal Reserve Bank of Boston.
    • Handle: RePEc:fip:fedbce:09-3
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    Cited by:

    1. Rickman, Dan & Wang, Hongbo, 2020. "Assessing State Economic Development from Motion Picture and Television Production Incentives: Standardizing the Industry for Analysis," MPRA Paper 104052, University Library of Munich, Germany.
    2. David Merriman, 2016. "What determines the level of local business property taxes?," Working Papers 16-2, Federal Reserve Bank of Boston.
    3. Gurmu, Shiferaw & Sjoquist, David L. & Wheeler, Laura, 2021. "The effectiveness of job creation tax credits," Regional Science and Urban Economics, Elsevier, vol. 90(C).
    4. Jeffrey Thompson, 2010. "Prioritizing Approaches to Economic Development in New England: Skills, Infrastructure, and Tax Incentives," Published Studies priorities_september7_per, Political Economy Research Institute, University of Massachusetts at Amherst.
    5. Rickman, Dan & Wang, Hongbo, 2020. "Lights, Camera, What Action? The Nascent Literature on the Economics of US State Film Incentives," MPRA Paper 104477, University Library of Munich, Germany.

    More about this item

    Keywords

    Tax incentives; Business tax; Tax incentives - New England; Business tax - New England;
    All these keywords.

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