Economic Development

Are Tax Incentives Good for Cities and States?

Page from June 2023 GFR

A little more than 30 years ago, the State of Alabama used hundreds of millions of dollars in tax incentives to attract a giant Mercedes-Benz plant to the state. That was the beginning of an escalating battle on the part of cities, counties, and states to attract business by handing over large amounts of taxpayer dollars.

The big question, of course, is whether this is genuinely good business for cities, which generally give up property taxes, and states, which largely forfeit income taxes. Most experts, as well as much academic literature, say that the answer to this is no.

  • Publication date: June 2023
  • Authors: Katherine Barrett and Richard Greene