Money for Nothing

Tax incentives are a mainstay of state and local economic development strategies and have been so for decades. Evaluations of their effectiveness have provided mixed results and few recommendations that have been translated into actual policy modifications. Since the mid-1970s, the State of Michigan has allowed local governments to grant substantial property tax abatements for new investments in real and personal industrial property. The program has been extremely popular, with more than 400 different municipalities granting a total of over 17,000 abatements. Despite its prominence, the program has been subject to only limited analysis at either the State or local level. This book systematically evaluates several different dimensions of industrial property tax abatements:The book utilizes a number of analytical techniques, including GIS, regression, factor, and shift-share analyses. While the data are drawn from a single state, they represent the complete history of the tax abatement program in a state that has allowed widespread use of local tax incentives. Thus, findings about the effectiveness, efficiency, and equity of local industrial tax abatements are applicable to local and state governments across the country. Further, findings about tax abatements are instructive for most financial or tax incentive schemes.

Previous studies have examined either the impact of economic development incentives or the changing manufacturing base of urbanized regions. One of the many contributions this book makes is to unpack the connection between the two: did policy play a role in stemming or hastening manufacturing decline in Michigan? Policy makers will not be happy with their findings, which is all the more reason why Reese and Sands' book should be required reading for public officials with authority over public expenditures and tax abatements.

Laura A. Reese is professor of political science and director of the Global Urban Studies Program (GUSP) at Michigan State University. Gary Sands is associate professor emeritus in the Department of Urban Studies and Planning at Wayne State University in Detroit, Michigan.