States Take the Lead in Evaluating and Improving Tax Incentives

Each year, states collectively spend tens of billions of dollars on tax incentive programs. Despite being states’ largest investment in economic development, research from The Pew Charitable Trusts found in 2012 that no state regularly and rigorously evaluated the effectiveness of incentives. This left policy makers with very little information to guide decision making. Since 2012, there has been a sea change: More than two-thirds of states and several major cities now regularly produce high quality evaluations of their major incentives, using rigorous and creative methods to measure impact. Pew's research both informed and followed this shift in the field. In addition to assessing the effects of incentives, these evaluations also provide a wealth of valuable information on how to design more effective incentives. As a result, policy makers are better informed and capitalize on the new information as they launch, continue, modify, or repeal programs.