With support from the Laura and John Arnold Foundation, the State and Local Finance Initiative is creating a framework for more transparent and accountable economic development strategies by giving policymakers a broader lens to examine and evaluate how economic policies interact with other state interventions.
You can also find the following reports, plus fact sheets, blog posts, and more resources, on our State Economic Development Strategies Toolkit feature page on taxpolicycenter.org.
States invest in three areas to encourage job and wage growth: the marketplace, the workforce, and the community. Successful economic development strategies coordinate all three types of investment. This report shows governments how to better unify these strategies, track results, and direct resources to programs that achieve desired outcomes.
The synthetic control method is an increasingly popular method for state policy evaluation. It provides quantitative support for case studies by creating a synthetic control region that simulates what the outcome path of a region would be if it did not undergo a particular policy intervention. In this report, we describe the method and provide simple step-by-step guidance for its application. We also explore pitfalls and concerns noted in the literature and other potential problems.
When workforce and economic development policy and practice align, states can achieve economic prosperity for businesses and residents of the state. However, little is known about such collaboration. This paper identifies opportunities for state leaders to improve their activities through joint planning and programming, policy, funding, and data sharing.
Commission reports include phrases such as "growth-friendly" and "optimum competitor," and cite economic development to justify their concluding recommendations. But most reports ultimately contain little exploration or explanation on how taxes and economic development are (or are not) linked. This is a missed opportunity.
Accompanying Brief: State Tax Commissions: 2000-2016
More than mere boosters, state economic development agencies are tasked with supporting existing businesses, encouraging entrepreneurship, recruiting new businesses, and coordinating the economic development activities of their local governments.
Every state uses a different combination of taxes to fund government services. Some reports suggest there is a single best tax structure to attract businesses and strengthen economies, but the specific features of taxes are as important for understanding tax burdens and economic development.
Access to financing is critical to businesses small and large looking to start new ventures, expand existing ones, or relocate facilities. When cost-effective financing is unavailable for worthy projects, state governments can and do step in to help. Governments use their power and their pocketbook to reduce risk for banks and investors, helping businesses by increasing access to capital through loans or investment.
State governments often use the tax system to partner with the private sector on economic development initiatives. In particular, tax incentives are a key part of many states’ economic development strategies. They are used to achieve goals beyond economic growth or job creation, such as spreading economic activity throughout the state (through geographic targeting) and focusing on perceived high-value industries.
Coordination among the numerous economic and workforce development policies and programs within state government is essential for economic growth. One opportunity for governors and economic development agencies is using the new Workforce Innovation and Opportunity Act of 2014.
The Government Accounting Standards Board (GASB) in 2015 issued new rules requiring state and local governments to disclose tax abatements that affect revenue-raising abilities in their annual financial reports. Disclosing tax abatements greatly improves transparency and compels state and local governments to develop new reports and procedures that open a window for a top-to-bottom review of economic development programs.
Other State and Local Finance Initiative projects