Policy Documents

Tax-Increment Financing: The Need for Increased Transparency and Accountability in Local Economic Development Subsidies

Rob Kerth –
October 13, 2011

Local and state governments use various tools to encourage development in economically challenged areas. Tax-increment financing (TIF) has been a leading tool used for this purpose. TIF allows cities and towns to borrow against an area’s future tax revenues in order to invest in immediate projects or encourage present development. When used properly and sparingly, TIF can promote enduring growth and stronger communities. When used improperly, however, TIF can waste taxpayer resources or channel money to politically favored special interests.

To protect the public interst, governments should impose strong safeguards that ensure that TIF projectsare implemented through a transparent, accountable process with clear and compelling goals.