WASHINGTON, D.C. — Local governments are losing more revenue than ever to corporate tax abatements granted as “incentives” for economic development.
In just six years between 2017 through 2022, a share of U.S. localities lost $93 billion, with annual losses rising 28%. School district losses rose 42%. For at least 18 school districts, revenue losses more than doubled in six years.
These numbers are very conservative because some localities still fail to disclose this previously hidden tax-break spending. And we surveyed only the 50 states plus DC and each state’s five biggest cities, counties, and school districts.
Those are key findings in “Hidden Costs No More: Six Years of Tax Abatement Disclosures,” a report just issued by Good Jobs First.
The findings were made possible by a recent change in government accounting rules which requires most local governmental bodies to report how much revenue they lose to corporate tax break programs.
The disclosures, found in end-of-year spending reports known as Annual Comprehensive Financial Reports, cover only some kinds of tax breaks, and some local bodies do not use so-called “GAAP accounting.”
From 2017 through 2022:
- Annual losses to tax abatements rose by 28%;
- For independent school districts, the trend in annual losses is far more severe, up 42% (reflecting K-12’s higher dependence upon local property tax revenue);
- Eighteen school districts’ revenue losses more than doubled;
- Losses are likely much bigger and wider than our figures because many localities are either failing to disclose or disclosing incompletely, and because school districts in about half the states do not report independently.
Tax abatements are reductions in local or state tax bills given to corporations or individuals in exchange for a community benefit such as job creation or capital investment. Politicians have always been anxious to tout the benefits of tax-break deals while downplaying the costs. This new data balances the debate.
“It’s vital that the public knows how much their communities and school districts lose to corporate tax abatements,” said Anya Gizis, Good Jobs First research analyst and the report’s lead author. “Only then can they begin to determine whether such giveaways were worth it and ask questions about what they got in return.”
The new data is available thanks to Governmental Accounting Standards Board (GASB) Statement No. 77 on Tax Abatement Disclosures, an amendment to GASB’s Generally Accepted Accounting Principles, or GAAP. Learn more about that here.
Read the full report.