From the Fort Wayne Journal-Gazette:
An Indianapolis manufacturer and distributor of personal care products announced an expansion plan Monday that promises to create 114 jobs in exchange for $1.25 million in tax credits granted by the Indiana Economic Development Corp.
When tax incentives are granted, are jobs produced?
Some states can answer authoritatively, according to a new study by the Pew Center on the States.
But most states, including Indiana, “have not taken basic steps to produce and connect policy makers with good evidence of whether these tools deliver a strong return on taxpayer dollars.”
The tax breaks awarded to businesses to entice them to locate or expand in a state are a wise economic investment if they create jobs and – ultimately – more tax revenue. If the incentives reduce revenue without an appreciable benefit, however, taxpayers lose. Indiana policymakers can learn from other states how evaluation of economic development tools can inform policy decisions and ensure that scarce tax dollars are used where they are most effective.
“Evidence Counts: Evaluating State Tax Incentives for Jobs and Growth” looks at the effectiveness of each state’s evaluation of tax breaks to determine how the information is used, whether all incentives are evaluated, whether they measure economic impact and whether they draw clear conclusions.
The study identifies 13 states as “leading the way” in evaluating tax breaks. Another 12 are credited with mixed results, while Indiana, 24 other states and the District of Columbia do not meet any of the criteria for quality or scope of their incentive program evaluations. Indiana was among 16 states with no evaluation documents produced between 2007 and 2011, according to the Pew report.
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Questions have been raised in recent years about the incentives handed out by the Indiana Economic Development Corp. WTHR-TV in Indianapolis investigated job claims made by the agency in late 2010, requesting proof of new positions created. IEDC refused to release numbers, claiming that its economic incentive agreements are confidential. WTHR found that as many as 40 percent of jobs announced by the state from 2006 to 2008 never materialized, although an IEDC-commissioned audit disputed the report.
The experience of other states shows that incentive programs can be evaluated effectively, allowing policy makers to decide whether they are achieving results. Lawmakers demand accountability elsewhere – why not for tax breaks?
http://www.journalgazette.net/article/20120417/EDIT07/304179996
