Property tax incentives are used by local governments around the country to try to attract new business investment to their communities. The incentives can reduce property taxes flowing to local governments by millions of dollars, but there is often very little—if any—public disclosure of the terms of these deals. That lack of transparency could soon change in a major way, if a proposal by the Governmental Accounting Standards Board is adopted.
GASB’s proposed guidelines would require state and local governments to disclose information on the number of tax abatement agreements they have in place and the total dollar amount of taxes abated in the current year. The guidelines would not require disclosure of the names of recipients.
Publicly available information on tax abatements would bring much needed transparency to the debate about property tax incentives. One of the main recommendations in the Lincoln Institute Policy Focus Report Rethinking Property Tax Incentives for Business is for state and local governments to publish information on incentives and conduct assessments. To date, very few governments have actually provided this information, so the GASB guidelines could be a game-changer. Good Jobs First has put together a massive database called the Subsidy Tracker, with information on over 250,000 business incentives, yet still the database is not comprehensive. The breadth of information that would result from the GASB guidelines would make it much easier for researchers to evaluate the effectiveness of property tax incentives to determine whether they are achieving their objective.
"We believe the data resulting from this new rule will create vast new bodies of scholarship in state and local finance, tax policy, government transparency, economic development, regionalism and sprawl, public education finance, and campaign finance," says Good Jobs First director Greg LeRoy.
Rethinking Property Tax Incentives for Business identified five types of property tax incentives: general property tax abatement programs, firm-specific tax abatements, tax increment financing (TIF), enterprise zones, and payments in lieu of taxes for business (PILOTs). The GASB guidelines might not extend to cover all five types of property tax incentives. In contrast, the Lincoln Institute report recommended improved disclosure for all types of property tax incentives, including TIF and especially PILOTs since they are the type of incentive for which there is the least data.
The campaign for transparency was covered recently by Next City. Instructions for those interested in commenting to the GASB now through January 30 are here.