Contact: Lawrence Cook
April 16, 2012
State Senator Steve Cassano (D-Manchester) today welcomed a new report by the nonprofit Pew Center on the States that says Connecticut is one of just 13 states in the nation that are leading the way in generating much-needed answers about the effectiveness of its various tax incentives for job growth.
Pew’s report examined both the quality and the scope of a states’ evaluation of its tax incentives for economic development; Connecticut joined Arizona, Arkansas, Iowa, Kansas, Louisiana, Minnesota, Missouri, New Jersey, North Carolina, Oregon, Washington and Wisconsin as the best in the country for meeting both criteria for scope of evaluation and/or the quality of that evaluation.
“It’s good to know that Connecticut is doing its due diligence when it comes to spending the taxpayers’ money. And it’s good to see we’re the only New England state and one of only two in the Northeast on the list,” Sen. Cassano said. “I’m definitely in favor of getting the most bang for our buck when it comes to tax incentives for job creation. This type of business encouragement is very prevalent around the country today because of the state of our national economy, and the Connecticut legislature seems to have made some very wise investments along these lines.”
The Pew Center warns that if states don’t base their tax incentive policies on evidence that they are needed and that they are working, they could have less money to spend on other critical services. By not using effective tax incentives, states could also miss out on opportunities to create jobs and support businesses, the Pew Center notes.
According to the Pew Center report, every state has at least one incentive program, and most have several. States offer credits, exemptions and deductions to businesses in specific industries, such as manufacturing or movie production. They also give them to firms willing to locate in struggling neighborhoods, or to firms that pledge to hire new workers. Frequently, states try to outbid each other. If one state offers a tax incentive to a business, its competitors often feel compelled to match it—or risk being left behind.
“Deciding whether to make these investments, how much to spend, and which businesses should receive them involves policy choices with significant implications,” said Jeff Chapman, senior researcher for the Pew Center on the States. “When states forgo revenue by offering economic development tax incentives, they have less money to spend on education, transportation, health care and other critical services. Conversely, if states do not use incentives or use them well, they may be missing opportunities to create jobs and attract new businesses.”
The Pew Center specifically noted that in 2010, Connecticut’s economic development agency assessed the state’s major tax credits using sophisticated analysis techniques. The agency concluded that while some incentives were not meeting the state’s goals, others were beneficial and cost-effective.
The Pew Center reviewed nearly 600 documents and interviewed more than 175 government officials and experts to examine how—and how well—states gauge the effectiveness of their tax incentives, if they do so at all. The study does not take a position on whether tax incentives for economic development are good or bad, but does identify promising approaches to evaluation.
Chair: Planning & Development
Vice Chair: Education
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