Federal Economic Incentive Program

And how can an incentive program be. 1994 Annual Report of the Federal Reserve Bank. Economic development incentives are intended to induce. Economic Development Incentive Programs. Give consideration to providing economic incentives to. For more information about the State and Federal Incentives.

The Economic Development Department uses community partnerships and incentive programs to compete for targeted industry jobs and investments to further the goals outlined by the citizens of San Antonio in the SA Tomorrow plan. The goal of the City’s economic incentives and business development programs is to minimize the cost of expanding or locating a business in San Antonio. The City of San Antonio is focused on providing powerful new resources and incentives to grow the economy in the region, revitalize targeted areas of the City and promote strong, balanced growth throughout the community. Download the. For a consultation with our staff on any of these incentives, please call (210) 207-8080. APPLICATIONS • TAX ABATEMENT AND EXEMPTION PROGRAMS • • • FLEXIBLE PERFORMANCE-BASED CASH GRANTS AND LOANS • BOND FINANCING ASSISTANCE • DEVELOPMENT ASSISTANCE AND FEE WAIVERS • • • FOREIGN TRADE ZONE • • INCENTIVES AVAILABLE THROUGH THE STATE OF TEXAS • • • • • FEDERAL INCENTIVES AVAILABLE •.

Download Naruto Shippuden Episode 1 480p. • • • • • • Economic Development Incentives: Research Approaches and Current Views Dan Gorin, of the Board's Division of Consumer and Community Affairs, prepared this article. Economic development incentives--state and local government efforts to encourage economic development--are one of a limited number of tools local policymakers have for stimulating local economies.

Some broad measures--investments in infrastructure (such as transportation), human capital (education, for example), and social infrastructure (such as recreational facilities)--may produce significant results over the long term. Targeted measures crafted to attract or retain businesses--usually a tax preference or financial assistance--offer the possibility of a quick payoff. Public interest in incentives has generally been muted, except when very generous incentive packages, egregious practices, or legal issues have prompted questions about their appropriateness and effectiveness.

Policymakers struggling with practical decisions have frequently turned to economists for guidance: Should incentives be offered? If so, how large should they be? And how can an incentive program be designed to increase its effectiveness?

Much of the research assessing the effectiveness of incentives has been inconclusive or unsatisfactory, in part because of methodological flaws and inadequate data. Interest in incentives surged in the 1980s and 1990s as a result of very public bidding wars among localities to entice businesses to their communities. In particular, the dollar amount of incentive packages offered to automobile manufacturers looking to locate new facilities soared during that period.

In 1980, Nissan received an estimated $33 million, or $8,000 per anticipated job, for locating a new facility in Tennessee. The amount of subsequent incentive packages handed out to Mazda, Saturn, DiamondStar, and Toyota, among others, rose over the next few years, and by 1987, Toyota was receiving an estimated $150 million, or $50,000 per anticipated job, for locating a new facility in Kentucky. And the incentive packages were growing again before long. Although BMW's 1992 package to locate in South Carolina was reportedly just $150 million, Mercedes-Benz reportedly received $258 million the next year to locate a facility in Alabama.

News accounts of ever-larger incentive packages caught the attention of economists and policymakers as well as the public. An essay entitled 'Congress Should End the Economic War among the States' appeared in the 1994 Annual Report of the Federal Reserve Bank of Minneapolis. A few years later, a conference on the same topic brought together policy-makers, economists, tax experts, economic developers, and business-site location consultants from around the country to discuss the matter. Many questions were raised, and research goals were identified, among them the goal of establishing good data with which to answer the economic questions.

In the past ten years, case studies, input-output analyses, and other research techniques have addressed some of the methodological flaws of earlier incentives studies. The availability of better data on both incentives and economic activity has also improved analyses of incentives research. The work described in this article illustrates some of the fresh ways that researchers have found to look at the effectiveness of incentives.

The focus is not on proving or disproving the effectiveness of incentives as a means of spurring economic development. Rather, the intent is to demonstrate that new ways are being used to advance the discussion.

The Conventional Wisdom, Ten Years Ago In the 1990s, many academics and policymakers expressed skepticism that state and local economic development incentives could induce firms to add jobs or invest in a particular locality. At the time, researchers tended to conclude that incentives were marginally effective at best. Such conclusions appeared to corroborate the general notion that incentives in the form of state and local tax breaks are ineffective because state and local taxes typically constitute a small portion of a business's overall costs. Furthermore, critics argued, if the incentives increased the amount of income or profit subject to federal income tax, a considerable portion of the amount saved through state and local tax relief would likely be offset by higher federal taxes. Much research during the 1980s and 1990s was based on flawed data or used independent variables that did not accurately represent the dollar amount of incentives. For example, several studies used the number of incentive programs on a state's books as a proxy for the state's total development effort. But often this number does not provide a complete picture.

Many states have on their books incentive programs that are dormant, unfunded, or known to be ineffective. And some states treat their incentives as multiple programs, while others provide the same benefits within a single program. Other early research on incentives used the budget of a state's lead development agency as a proxy for development efforts. However, that amount is rarely an accurate indicator of the amount spent directly on incentives. For example, development agency funds are typically used for other aspects of development, such as marketing and staff payroll. Development agency funds are also likely to be used for activities not directly related to business development, such as housing development or the promotion of tourism.

Moreover, funding for incentives may not come from a development agency's budget. If the incentive takes the form of a tax preference, an appropriation may not be necessary.

Les Sept Piliers De La Sagesse Pdf To Word. And if an appropriation is necessary, the funding for incentives may come from the budget of a different agency, such as education or transportation. Economic development data concerning the state of Oklahoma, provided by the National Association of State Development Agencies (NASDA), illustrate the inadequacy of some data collection efforts. According to NASDA, the state spent $20.45 million on economic development in fiscal 1997. But this amount was simply the budget for the Oklahoma Department of Commerce, the state's lead development agency. The state's single largest incentive that year--worth just more than $1 billion--was a set of sales tax exemptions available to all manufacturers for purchasing machinery, equipment, and goods used and consumed in manufacturing.

An argument could be made that these sales tax exemptions were not truly incentives and, therefore, were appropriately not included in the NASDA total because they were nondiscretionary and fairly common among the states. But there are other reasons to view the single NASDA figure as inadequate. The most promoted incentive in Oklahoma in fiscal 1997--a wage subsidy offered under the state's Quality Jobs program--cost the state $21.1 million that year. But again, that amount was not part of the Department of Commerce's budget. A second incentive, a local property tax abatement costing $14.8 million in fiscal 1997, was a budget item at the state level, as the state reimbursed local governments providing the incentive; but this incentive was also not in the department's budget. A third incentive in fiscal 1997--$13.2 million in tax credits for investment and job creation--was a standard tax preference, not an appropriated expenditure.

Clearly, the use of a narrowly focused budget figure as a proxy for the state's financial commitment to its major incentives, while seemingly logical, is problematic, and it is unlikely to result in meaningful conclusions as to the benefits of the incentives. The Search for a Better Research Design The work of several researchers began to change the conventional wisdom that business incentives were marginally effective at best, as Fisher and Peters noted in 1997. By conducting and identifying studies that used more-detailed data and more-refined techniques, Newman and Sullivan compiled evidence of the effectiveness of incentives. Bartik's contribution to incentives research was twofold: his comprehensive literature review brought to light a substantial body of work--released up through the early 1990s--that tracked the relationship between incentives and state and local development; furthermore, his systematic analysis of such variables as employment, home prices, and wages in metropolitan areas illustrated the effect on these variables of economic growth that may result from incentives and other development efforts. Defining Economic Development Incentives Although research on incentives improved through the 1990s, more clarity was needed to ensure that studies were based on complete data. At the root of the problem, as the Oklahoma example shows, was the lack of a comprehensive definition for 'economic development incentives.'

The Texas Local Economic Development Sales Taxes In 1989, the Texas legislature amended existing state law to allow cities meeting certain criteria to adopt a dedicated sales tax to fund industrial development projects. Follow-up legislation in 1991 allowed cities to adopt a sales tax dedicated to quality-of-life improvements. These two programs--known by their code designations as the section 4A tax and the section 4B tax--are commonly referred to as the Texas economic development sales taxes. Cities in counties whose population is less than 500,000, and smaller cities in the six largest Texas counties (Bexar, Dallas, El Paso, Harris, Tarrant, and Travis), are eligible to levy the taxes. The taxes may be imposed only if the citizens of a city approve their use in a regular election; the taxes stay in effect either for the period specified on the ballot or, if no end date is specified, until they are repealed. Each of the two taxes may be authorized in increments of one-eighth of 1 percent, up to a maximum of 1⁄2 percent.

A city may have the two taxes in force simultaneously. However, the combined rate of all local sales and use taxes, including these special taxes, may not, under Texas law, exceed 2 percent. The uses for the two taxes, as defined in the state laws creating them, are as follows: • Section 4A. To acquire or pay for land, buildings, equipment, facilities, expenditures, targeted infrastructure and improvements for purposes related to manufacturing and industrial development. • Section 4B.

To undertake projects for quality-of-life improvements that will attract and retain primary employers. Money may be spent on land, buildings, equipment, and facilities expenditures and improvements for tourism, entertainment, recreation, athletic facilities, and parks; affordable housing; and municipal infrastructure. Funds raised through a 4A tax are perhaps the clearest example anywhere of a dedicated pool of funds that policy-makers may use at their discretion to offer incentives. Conversely, expenditures of funds raised through 4B taxes are more representative of the type of public expenditures for economic development desired by researchers and policymakers who downplay the effectiveness of direct business incentives.

As of October 2007, of the more than 1,000 cities in Texas, the 4A tax was in place in 222, and the 4B tax was in place in 439. Because of the relatively high rate of participation in the programs, Texas may be an ideal case study for analyzing the effects of direct (4A) and indirect (4B) economic development incentives. Cities adopting one or both of the taxes are required to establish a community corporation to administer the funds raised. The practical difference between the 4A and 4B taxes can be seen in the primary objectives of the community corporations as well as in the distribution of their spending (tables and ). According to the most recent state report on these incentives (covering fiscal 2005), job creation and job retention were the primary objectives in nearly four out of five cities that had enacted a 4A tax, compared with about half of the cities that had enacted a 4B tax. Sports, recreation, and tourism development were much more likely to be the focus of 4B cities. In fiscal 2005, about 24 percent of 4A tax revenues were spent on direct business incentives (such as buildings and equipment for businesses), compared with only 7 percent of 4B tax revenues.

In addition, almost 60 percent of 4A revenues were spent on marketing and promotion, debt service, and capital costs. Much of the spending on debt service and capital costs is likely being used on land, the single most prevalent capital asset reported by all 4A and 4B cities. Average annual growth of gross sales in cities with and without 4A and 4B taxes, 1992 to 2004 City status Average annual growth (percent) T value for difference of means Number 4A cities With tax during period 6.51 2.11 167 Without tax during period 5.18...

789 4B cities With tax during period 6.87 4.01 255 Without tax during period 4.74... 625 4A and 4B cities With both taxes during period 8.80 2.88 48 With neither tax during period 4.58...

503 All Texas cities 5.48... 1,012 Note: For cities without the tax(es), includes cities that did not have the tax during the entire period 1992-2004. For cities with the tax(es), includes only those cities that had the tax(es) for at least six years during the period 1992-2004. Excludes cities having either no population or no reported business sales in either 1992 or 2004.

Another way of looking at program performance is to compare the number of announced investments by new and expanding businesses in cities that had and had not adopted the section 4A tax. Table shows that by 2003 some 20 percent of eligible Texas cities had adopted the 4A tax. Those 4A cities accounted for more than 40 percent of the announcements by new businesses--the firms most likely to be affected by the presence of a development incentive. Among 4A cities, the prevalence of new-firm announcements was most pronounced in the cities that had populations between 5,000 and 30,000.

Specifically, the 86 4A cities with between 5,000 and 30,000 residents accounted for 39.8 percent of all cities of this size and 54.2 percent of new-firm announcements. Among the cities with more than 30,000 residents, the 4A cities' shares were 30.5 percent of the total number of cities and 34.7 percent of new-firm announcements. Overcoming State-Tax-Related Market Distortions by Providing Local Incentives Distortions Related to Corporate Income Tax Apportionment Formulas Firms that produce and sell goods or services in more than one state generally are liable, in each of those states, for taxes on some portion of their corporate profits. Many states determine the proportion of a firm's profits subject to state taxation on the basis of three equally weighted factors: the percentage of the firm's (1) property located in the state, (2) sales made to residents of the state, and (3) payroll paid to residents of the state. Uniform application of this formula across the states would result in the states, collectively, taxing all of a firm's profit exactly once, and only once. Some states, however, emphasize the sales factor in their formula by making it twice as important as the other two factors, or double-weighting it. And a few states take the so-called single-sales-factor approach, basing the proportion of profits subject to state taxation solely on the percentage of sales in the state.

Emphasizing the sales factor may increase a state's attractiveness as a place for corporate expansion, but such an approach results in market distortions compared with situations where the once-standard three-factor approach are employed. Emphasis on the sales factor magnifies the problem of 'nowhere income'--income that ends up not being taxed because a corporation has so little activity in a state to which a sale is allocated. In such case, a 'nexus' does not exist and, therefore, the state does not have the authority to tax the corporation.

Some states have enacted a 'throwback rule,' under which profits from out-of-state sales-- profits that are not taxed by other states--are re-allocated to the enacting state. Such tax code differences among states play into decisions by businesses planning new facilities and operations. Suppose, for example, that a firm planning to build two identical facilities tries to decide whether to locate both facilities in state A, both in state B, or one facility in each state.

Assume that the firm knows that it will sell 5 percent of its output in each state and 90 percent in the rest of the country, and that both states tax corporate income at 6 percent of profits. State A will double-weight sales, while state B weights sales at 100 percent. State B does not have a throwback rule. Table shows the firm's potential tax liability under several scenarios, assuming annual profits of $100 million. Locating both facilities in state B would save either $5.7 million or $2.85 million more than locating both in state A, depending upon whether state A has a throwback rule. Locating one facility in each state would result in a tax liability either 20 or 5.5 times higher in state A than in state B.

Thus, the firm might locate in state B--regardless of the difference in its operating costs in that state relative to its costs in state A--resulting in an inefficient allocation of resources. State A could, to make itself a more attractive location, adopt the same apportionment formula and rules as state B, a strategy that could allow the firm to allocate its resources more efficiently; however, such a change could radically affect many additional firms in state A. Alternatively, state A might choose to use targeted incentives to overcome the distortions resulting from these differences in state tax code structures.