The Unknown Consequences of Place-Based Tax Incentives

Nearly 30 years have passed since Professor Ellen Aprill warned policymakers not to rely on tax incentives to fight urban poverty. At the time, federal and state governments were just beginning to embrace so-called place-based tax incentives, which are used to promote investment in low-income areas. Aprill was skeptical and expressed doubts about their capacity to change business behavior or to benefit low-income residents. Nevertheless, federal and state lawmakers charged forward, introducing new place-based tax incentive programs in the decades that followed. Today, tax incentives are a central part of most place-based policy initiatives. There is still a lot we do not know about the consequences about place-based tax incentives, however. Almost everything we do know about place-based tax incentives has been produced by economists. Those studies cast serious doubt about place-based tax incentives’ capacity to benefit low-income communities, but they also have significant limitations. As a result, our understanding of the consequences of place-based tax incentives is incomplete, making it difficult to chart a path forward. The purpose of this Essay is to highlight several alternative scholarly frameworks that may be relevant to understand the consequences of place-based tax incentives. It proceeds with the modest goal of starting a conversation, and it makes no attempt to provide the final word. Rather, this Essay argues that the field of place-based tax incentive research must be expanded to include new, diverse perspectives—from researchers across the academy, from scholars of color and other nontraditional backgrounds, and even from members of low-income communities