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Friday, October 2, 2015

Time for a new incentives estimate!

It's been over four years since I last published an estimate of U.S. state and local government subsidies in Investment Incentives and the Global Competition for Capital, and the data there represented the situation circa 2005. So I think it's time to begin a new estimate, don't you?

We have a great place to begin. As you may recall, in December 2012 Louise Story of the New York Times published a series of articles, "The United States of Subsidies," which was accompanied by two searchable databases, one of individual deals and one on subsidy programs. The latter was far more comprehensive than anything previously published.

Unfortunately, the program database was flawed because $52 billion of the reported $80 billion in annual subsidies were for sales tax breaks that were for the most part not subsidies at all, but ways to prevent sales tax from being charged for inputs into goods that would pay full sales tax on their final sale. Upjohn Institute economist Timothy Bartik documented that $4.80 billion of the $4.83 billion in sales tax "subsidies" in Michigan fell into this category. There were smaller errors in the program database as well, such as wrongly including net operating loss provisions and omitting the cost of single sales factor apportionment (h/t Timothy Bartik).

Now, dear reader, I'd like to solicit your help. The first step is to review the sales tax breaks in the database, so as to include those relatively few that are genuinely subsidies, such as exemptions for capital goods, which by nature are targeted at investment. If you have insights on this for any of the sales tax programs, I would be extremely grateful if you would share them with me. I would also appreciate any assistance on step 2, which is updating from the 2011 data Story used. If you have the numbers or know the sources, please send them to me. Finally, the same is true for step 3, gathering information on local subsidies, which is much sparser than state-level program data. I will, of course, acknowledge your help in any publications based on this work.

For this project, you can email me at

Thanks in advance!