New study finds little evidence that state and local business tax incentives increase economic growth. The research, by Columbia Business School economist Cailin Slattery and Princeton University economist Owen Zidar, evaluated state corporate taxes, tax credits, and firm-specific incentives. It finds some evidence of direct employment gains from attracting firms but no strong evidence that firm-specific tax incentives increase broader economic growth. The report offers some of the latest and clearest national data on state and local incentives.
Too bad New York didn’t see the study before wooing Amazon. State and local officials initially offered the company $800 million more than previously known for the online retailer’s East Coast offices. The Wall Street Journal reports (paywall) that the initial offer included $1.4 billion in tax credits and $1.1 billion in grants. New York also would have paid some employees’ salaries. Ultimately the state’s economic development authority offered $1.2 billion of tax credits and $505 million to reimburse some construction costs. Amazon selected Long Island along with Northern Virginia but abandoned its New York plans last year after opposition from local elected officials.
Does New Jersey’s Film and Digital Media Tax Credit Program earn the state jobs? World Wrestling Entertainment received a $2.9 million tax break in exchange for holding a Wrestlemania show at MetLife Stadium. Promoters claimed it would boost the economies of New York and New Jersey by $100 million but the event created no new long-term jobs and generated no sustained economic growth. Before the program became law, New Jersey’s Office of Legislative Services estimated it could cost the state up to $425 million over five years. It could not determine how much revenue it could produce.
Colorado’s TABOR triggers income tax relief. The Tax Foundation reports that this spring, Coloradans will face a reduced flat income tax rate of 4.5 percent, down from 4.63 percent. State tax collections exceeded the Taxpayer’s Bill of Rights (TABOR) revenue limit by $428 million in fiscal year 2019, resulting in the temporary rate reduction. This is the first time that a TABOR surplus has been big enough to trigger a rate cut.
The IRS 2019 Annual Report is out. “Internal Revenue Service Progress Update/Fiscal Year 2019 – Putting Taxpayers First” provides an overview of operations including taxpayer service, compliance, and support. The report highlights the work of IRS employees, including development of a new Taxpayer Withholding Estimator. It also focuses on criminal investigation results, ongoing compliance issues, and IRS implementation of new tax laws.
ISO taxpayer advocate. Speaking of the IRS, Politico’s Aaron Lorenzo wonders why the IRS has not picked a new National Taxpayer Advocate. The long-time head of the office, Nina Olson, retired last summer and gave notice nine months ago to give Treasury Secretary Steven Mnuchin plenty of time to fill the post. Aaron reports that Treasury seems to be in no rush to fill the slot.
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