A new policy brief from the Kansas Center for Economic Growth emphasizes the importance of tracking and measuring state tax incentives.
Currently, Kansas trails the nation and region by not having a plan to regularly evaluate tax incentives, allowing lawmakers to measure economic impact and make informed policy choices. Although Kansas spends millions of dollars annually on tax incentives, without regular evaluation of the programs, it is difficult to know whether they meet their goals.
Several current proposals would help increase transparency around economic incentives and their effects. More knowledge about the cost, effects and goals of economic incentives can lead to stronger, more evidence-based policymaking.
A recent study by the Upjohn Institute found that less than one-fifth of business location decisions are influenced by tax incentives. More than 80 percent of the businesses, and associated jobs, would be created without the use of incentives. The revenue waste is substantial: nationally, “state and local governments … give away more than $30 billion a year in incentives that create zero jobs.”
As Kansas works toward economic stability, improving how the state measures its tax incentive programs can help legislators be good custodians of taxpayer dollars and better target incentives to maximize return on the public’s investment.
Tax incentive evaluations can tell us what types of incentive programs work, what types of businesses are getting incentives, and if tax incentives create jobs. Simply, the evaluation process can determine whether the incentives are worthwhile.
Evaluation of tax incentive programs can accomplish three things:
- Shed light on the success or failure of these programs.
- Help policymakers be good stewards of Kansas’ resources and identify the most effective ways to bolster job creation.
- Create a regular schedule for review of tax incentive programs, which provides stability for developers and investors, as they can predict when programs will be reviewed.
The Kansas legislature should develop evaluation processes for tax incentive programs to increase transparency, measure effectiveness, and ensure a return on investment of economic development tools.