![]() While proponents of incentives view them as a tool to promote desirable economic activities-like job creation and new capital investment-their effectiveness at achieving desired outcomes is dubious and difficult to measure. By way of comparison, state and local governments collected less than $66 billion in corporate income taxes in FY 2019. ![]() Altogether, state and local governments give out an estimated $95 billion a year in business incentives. Some states like South Dakota and Wyoming largely forgo tax incentives because they do not levy corporate or individual income taxes in the first place other states like New Hampshire, North Carolina, Utah, and Indiana have relatively low reliance on tax abatements as a share of their state tax collections, despite levying corporate income taxes.īut in most states, tax incentives abound, usually offered as a way of promoting new investment or attracting certain industries by shielding them from the full impact of otherwise high tax rates. One of the key concepts illustrated in our Location Matters study-an apples-to-apples comparison of the state tax costs of doing business in all 50 states and the District of Columbia-is the fact that incentive-heavy tax structures undermine tax equity, with tax breaks for new firms driving up the tax burdens established firms pay. But just because most states offer numerous incentives doesn’t mean doing so is the best approach. Nearly all states offer at least one of those major tax breaks, with most states offering two or more. Those are just five of the major categories of tax incentives states offer with the goal of encouraging new investment and economic development in their state.
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