Tax Abatements Research Articles

Incentivising the market to build affordable housing: The New York City toolkit

Affordable housing is among the biggest policy challenges facing cities worldwide. Treating New York City as a case study, this paper reviews a multifaceted toolkit to combat the housing crisis. Specifically, the analysis focuses on how the government incentivises real estate developers to build affordable housing, with both financial incentives such as tax abatements, tax credits and loans funded by tax-exempt bonds and non-financial means such as zoning regulations. The study demonstrates both the successes achieved by New York City and the unintended consequences that emerged from these interventions, and the research argues that beyond financial and economic considerations, long-range spatial planning factors play a pivotal role in the formulation of effective affordable housing policies. The research underscores the need for policy makers globally to take a holistic approach and integrate various elements of city growth to address the intricate challenges posed by housing crises in urban environments.

Combined strategies for green roof incentive policies in Lisbon: Evaluating the potentiality of concession grants and identifying priority intervention areas

Incentive policies to promote new technologies is a strategy often employed by policymakers and governments. In some cities worldwide, mechanisms to encourage the adoption of Green Roofs (GR) have been implemented over the years. Although GR is not a new technology, the use of incentives, such as subsidies and tax abatements and/or exemptions, is still a recent strategy in many countries. The study covered in this paper proposes to explore the potential of combined incentive mechanisms for green roofs, using direct incentives (financial subsidies) and indirect incentives (tax/fee rebates). The granting incentives were verified by the feasibility assessment from both private (saved money) and public perspectives (reduction in municipal revenue) using scenarios of abatement percentages for fees and taxes and combining direct and indirect incentives. In addition, priority intervention areas for the installation of green roofs were defined based on three parameters: (i) the proportion of existing green spaces, (ii) urban heat islands and (iii) the potential of the building stock for green roof retrofit. The results show that granting a combined solution can be an effective option for facilitating the implementation of green roof projects. Moreover, the study serves as a decision support guide for politicians, urban planners, and public managers to formulate incentive proposals and make well-informed decisions regarding the incentive policies for GR.

The State Capacity Ceiling on Tax Rates: Evidence From Randomized Tax Abatements in the DRC

This paper investigates how tax rates and tax enforcement jointly impact fiscal capacity in low‐income countries. We study a policy experiment in the D.R. Congo that randomly assigned 38,028 property owners to the status quo tax rate or to a rate reduction. This variation in tax liabilities reveals that the status quo rate lies above the revenue‐maximizing tax rate (RMTR). Reducing rates by about one‐third would maximize government revenue by increasing tax compliance. We then exploit two sources of variation in enforcement—randomized enforcement letters and random assignment of tax collectors—to show that the RMTR increases with enforcement. Including an enforcement message on tax letters or replacing tax collectors in the bottom quartile of enforcement capacity with average collectors would raise the RMTR by about 40%. Tax rates and enforcement are thus complementary levers. Jointly optimizing tax rates and enforcement would lead to 10% higher revenue gains than optimizing them independently. These findings provide experimental evidence that low government enforcement capacity sets a binding ceiling on the revenue‐maximizing tax rate in some developing countries, thereby demonstrating the value of increasing tax rates in tandem with enforcement to expand fiscal capacity.

Urban schools and the growth machine: When public education and development policy conflict

ABSTRACT The following case study explores the durability of conflict between urban growth machine policies, public-school finance, and educational equity in Columbus, OH. The City of Columbus is one of the fastest growing cities in the Midwest, but it’s largest urban public school district (Columbus City Schools) has grown smaller, more segregated, and poorer. Historical development policies enabled the city’s growth but undermined the school district. Contemporary conflict has emerged related to the impact of tax abatement programs on public school funding. Our Franklin county analysis suggests previous statewide estimates of public schools revenues lost to abatements were underestimated. Analysis of the relationship between abatements and school finances for all public-school districts in Franklin County finds a weak relationship with per pupil spending, but a strong relationship with district demographics and classroom expenditures. Our case analysis suggests planners should focus greater attention on the intersection of economic development policy and public schools.

Do Economic Development Tax Abatements Affect School Finances?

Criticisms against tax incentives typically come from either the regional inequality perspective that compares a locality with others in terms of the amount of revenues foregone or the opportunity cost perspective that compares a locality with itself in an alternate reality where it foregoes less or none. How foregone/hypothetical revenues affect collected/actual revenues and related fiscal outcomes is less understood. This article examines the association between the amount of abated taxes and school district revenues and expenditures in 2019 for the nine U.S. states that have sufficient tax abatement data for such analyses. Findings show that districts experiencing greater incentive cost burden have fewer overall revenues per pupil, depend more on local sources besides property tax, spend less on teaching salaries, and are more likely to be underfunded. Some of these effects vary by district wealth, suggesting the need to fine-tune the incentive award levels according to local conditions.

The Effect of Tax Abatement Disclosure on Municipal Financing

The Effect of Tax Abatement Disclosure on Municipal Financing

The State Capacity Ceiling on Tax Rates: Evidence from Randomized Tax Abatements in the Drc

The State Capacity Ceiling on Tax Rates: Evidence from Randomized Tax Abatements in the Drc

Making the students pay? The gross cost of property tax abatement for U.S. school districts

ABSTRACT In the U.S., local property taxes fund public education more than any other source, but the revenue cost of property tax abatements for school districts has long eluded capture. This paper finds that at least $2.4 billion was diverted in 2019 to fund tax incentives from just the small percentage of school districts that disclosed out of the 10,370 financial statements reviewed. School board authority in the award process is limited or absent in most cases. Given the cost-inefficiency and cost-ineffectiveness of many awards, the long period of time before profits come in, and the critical need for closing the funding gap in public education, more judicious use of tax incentives is called for. Specifically, we recommend that all states establish independent agencies for reviewing incented projects regularly and rigorously, impose benefit reduction or clawback on underlivering recipients, enable institutions for multiscalar collective action, and maintain oversight of tax abatement reporting by local governments.

The Determinants of Tax-Based Incentives: An Empirical Analysis of State Governments

To determine why state governments often use tax-based incentives, this study focuses on five major tax-based incentives: job creation tax credits, investment tax credits, R&D credits, property tax abatements, and customized job training subsidies. The statistical results indicate that a state government’s prevailing political ideology influences the choice of economic development activities. Accordingly, a more liberal state is less likely to use property tax abatements and customized job-training subsidies, and more likely to use job creation tax credits and R&D tax credits. Further, competition does not operate to trigger tax-based incentives. State economic conditions are not significantly related to the use of incentives. This result could imply the prevalence of political factors in the use of incentives.

LEGAL CONTRIBUTION TOWARD A GREENER EUROPEAN UNION

European Union has a diverse environment and recently the awareness of the importance of sustainable development has increased significantly. Subsequently, the greener and more sustainably oriented narratives have been used in documents and legislation produced by the European Union. The European institutions have established a legal framework to facilitate sustainable investments. Consequently, member states of the European Union have been implementing more sustainably prone legislation, but have chosen different legal approaches on how they will tackle the challenges associated with the adoption of more sustainably prone legislation. One of the successful ways how member states encourage more sustainable choices are tax abatements. This article compares and evaluates the best approaches by member states with better-developed tax abatements for sustainable choices and their results. The findings of this article are that various approaches have been developed and suggest how other countries can mirror proven ways towards improvement.

Value Creation, Capture, and Destruction

Problem, research strategy, and findings Municipalities relying on tax increment financing (TIF) to underwrite large-scale infrastructure and development projects assume that tax revenues from the increase in property values will be sufficient in the short run to cover capital expenses (i.e., that projects are self-financing). By examining a case of TIF in action, we move beyond expectations about how TIF should work in theory. Hudson Yards on the far West Side of Manhattan is one of the largest TIF projects in the United States in recent years and the first one implemented in New York City. We refined the conventional fiscal impact analysis approach by tracking costs and revenue flows of the project between 2005 and 2020 and comparing rents, assessed values, property tax appeals, abatements, and land prices across relevant submarkets. Through this exercise and critical reading of the literature, we developed a framework for analyzing TIF that treats property values as extrinsic and determined by the political arrangements and calculative negotiations that create, capture, and destroy them. Interactions between private property markets and governing bodies cause costs to fluctuate, responsibility for different expenditures and claims on new revenues to shift, and the location and magnitude of spillover effects to change over time. The flexibility of property values in Hudson Yards allowed the taxes to be used at cross-purposes, jeopardizing the payback streams and inflating risks shouldered by the public sector. Takeaway for practice Although our findings are limited by the single case study approach, the creation–capture–destruction heuristic we developed can help planners modify their expectations of the future and spend economic development dollars more effectively in the present. We suggest that municipalities claw back subsidies upon a property’s sale through a local capital gains tax and restrict the use of appeals and abatements in TIF districts to limit the potential for value destruction.

Now You Are Part of the Solution: Bioethicists' Contribution in Addressing Racialized Health Inequity.

Neoliberalism (an economic approach emphasizing tax abatement, market deregulation, and social safety net reduction) promotes inequality and unfavorable health outcomes. These outcomes are exacerbated among racial and ethnic minorities, as this policy approach is often coupled with various forms of institutional racism. The combination of these factors translates into concerning population health disparities in the United States. More egalitarian policies could disproportionately affect the socially marginalized and help rectify these challenges. Given the social and cultural capital bioethicists have in the fields of medicine, public health, and policy, this group is uniquely positioned to help remediate racial and ethnic inequity. Moreover, the unique skill sets bioethicists employ (conflict resolution, mediation, negotiation, facilitating public engagement, policy analysis) can be useful to improving the health of the populous. Thus, bioethicists can play a key role in addressing the most concerning health challenges and inequities today.

Towards the Development of a Comprehensive Lifecycle Risk Assessment Model for Green Roof Implementation

A green roof (GR) provides numerous social, environmental, and personal benefits through its lifespan, while exploiting these benefits is associated with several uncertainties. Since these risks to GR adoption have not yet been investigated and analyzed comprehensively, this research is aimed at developing an original risk assessment model to ensure the objectives of GR adoption are fully achieved. To this end, two novel approaches were employed, namely Monte Carlo-DEMATEL and fuzzy parsimonious analytic network process to determine the inner dependencies among the risk factors and rank them based on their relationships and importance, respectively. The findings showed that “irregular maintenance” and occurrence of “fire” are the most influential threats, while “flash flood reduction” and “achieving green building certificate award” are among the most influential opportunities. Moreover, it was shown that although “tax abatement” and “monetary loss” are the most important opportunity and threat, respectively, the ranking order of risk factors varies among an intensive GR and an extensive GR. Finally, it was concluded that with such analyses, the decision-makers have clear insights on the most influential positive and negative risks for managing purposes. The novel methods used in this research can be replicated to achieve more accurate and efficient results.

Effects of trade credit insurance on remanufacturing decisions under carbon tax and emissions abatement

Effects of trade credit insurance on remanufacturing decisions under carbon tax and emissions abatement

Effects of trade credit insurance on remanufacturing decisions under carbon tax and emissions abatement

Effects of trade credit insurance on remanufacturing decisions under carbon tax and emissions abatement

“The Answer My Friend is Blowin’ in the Wind”: A stochastic assessment of wind farms financial feasibility and economic efficiency

Two financial incentives that have spurred the growth of renewable energy including wind farms are Production Tax Credits (PTC) and Property Tax Abatement (PTA). PTC provides a tax credit of 1¢–2¢ per kilowatt-hour for the first 10 years of electricity generation for utility-scale wind, and PTA is a rebate provided by the local governments to wind farms in the U.S. Midwestern states. Past researches suggest that the breaking-even of renewable energy projects can partly be attributed to PTC. However, in cognizance of the irregular availability of such incentives, there seems to exist a need for financial feasibility analysis of the wind farms. The study uses a stochastic method and a scenario approach to address this research question. The analysis considers the capital and operating costs, interest payments, local and federal taxes, and production of wind energy and sales revenues, and inherent uncertainties in key parameters. The results shed some light on the impacts of PTC and PTA on the financial feasibility of wind farms in the U.S. Midwestern states. It is observed that PTC is a more effective instrument compared to PTA. The paper concludes by discussing policy implications of local government rebates and federal incentives.

In Case You Haven't Heard…

Warwick, New York, will have a cannabis cultivation site soon, with construction already underway by Green Thumb Industries of Chicago. The location is on the site of a former prison, where there is already a greenhouse and processing facility. The company has invested $150 million to remodel the site, which will create 100 construction jobs and 100 permanent positions with benefits, according to an article in the Sept. 9 Times‐Union. Green Thumb purchased the 40 acres of former prison grounds for $3.3 million in May, after Orange County approved a 15‐year tax abatement. The $3.3 million covered the town's remaining debt on the cost of the purchase of the prison property from the state. The town is not ready, however, to allow on‐site cannabis consumption at its cafes or to allow marijuana dispensaries at all.

Who's Afraid of Sunlight? Explaining Opposition to Transparency in Economic Development

AbstractFirms and governments often negotiate economic development deals, such as tax abatements, with limited transparency, using exceptions to public records laws or other strategies for nondisclosure. In this article we explore the motivations of firms for keeping economic development deals out of the public eye. We explore legal challenges to public records requests for deal-specific, company-specific participation in a state economic development incentive program. By examining applications for participation in a major state economic program, the Texas Enterprise Fund, we find that a company is more likely to challenge a formal public records request if it has renegotiated the terms of the award to reduce its job-creation obligations. We interpret this as companies challenging transparency when they have avoided being penalized for noncompliance by engaging in nonpublic renegotiations. These results provide evidence regarding those conditions that prompt firms to challenge transparency and illustrate some of the limitations of safeguards such as clawbacks (or incentive-recapture provisions) when such reforms aren't coupled with robust transparency mechanisms. We speculate that the main motivation for these challenges is to limit scrutiny of these deals that could lead to backlashes against future economic development agreements.

Environmental policies in a stagnant economy

In this study, we examine the impact of environmental policies on consumption and pollution emissions in the cases of full employment and stagnant economy using a dynamic optimization model featuring a monetary economy with persistent unemployment. If full employment prevails, environmental policies such as emission tax and public pollution abatement will naturally crowd out commodity production and thereby decrease consumption. However, if there is unemployment, environmental policies stimulate consumption and production by increasing the total employment and mitigating deflation, simultaneously generating additional pollution emissions. Net pollution emissions may eventually increase. We also examine the optimal environmental policy mix.

Aging, Property Taxes, and Housing Adjustments: Lessons From the Health and Retirement Study

ABSTRACT The U.S. housing market is being reshaped by the housing decisions of seniors aged 65 and older. This study examines the reasons why senior homeowners choose to move, downsize, and transition out of homeownership, placing particular emphasis on the role of property taxes and property tax abatement programs. Our findings suggest that although rising property taxes increase the probability that senior homeowners will become renters or downsize, property tax abatement programs seem to have largely failed to help low-income senior homeowners remain in their homes. High-income seniors receive a modest transfer from property tax abatement programs and continue owning their homes when moving, whereas low-income seniors transition from owning to renting when moving, even in places with generous property tax abatement programs. The U.S. senior population will grow significantly over the next several decades, and policymakers will need to design effective policies to create stable, affordable housing environments for seniors aged 65 and older. Our findings provide evidence to inform this effort.