Spring 2011

Competing for the Next Hundred Million Americans: The Uses and Abuses of Tax Increment Financing

Articles

Competing for the Next Hundred Million Americans: The Uses and Abuses of Tax Increment Financing

Many communities across the country include tax increment financing among their means of financing public improvements, such as stadiums, museums, plazas, and promenades. After illustrating the beneficial use of tax increment financing, this article describe six major criticisms often leveled against tax increment financing (TIF). These six criticisms are divided into three pairs: the questionable, the contingent, and the convincing. The first two criticisms are objectionable because they overestimate what TIF can realistically achieve. The second pair of criticisms are contingent because their validity depends on a comparison of a project’s success in adding net present value to the tax base greater than the local tax revenues that would have been generated had the TIF-funded project not been built. The last two criticisms, calling for greater TIF accountability and fiscal transparency, merit serious attention. While some localities make responsible fiscal disclosures, many others are so secretive about how they raise and spend public funds on redevelopment projects as to threaten popular support for such programs.

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