Center for Business and Economic Research - Ball State University


CBER Data Center
Projects and PublicationsEconomic IndicatorsWeekly CommentaryCommunity Asset InventoryManufacturing Scorecard

About

Commentaries are published weekly and distributed through the Indianapolis Business Journal and many other print and online publications. Disclaimer

RSS Feed

Disclaimer

The views expressed in these commentaries do not reflect those of Ball State University or the Center for Business and Economic Research.

Recent

Previewing the Long-Term Effects of TariffsThe dominant effect of the Trump tariffs will be to raise production costs on almost every American manufacturing firm.

It’s TDS to Suppose These Tariffs Are WorkingTrump has pushed the U.S. into an economic downturn that will be especially hurtful to Hoosiers.

Trump’s Tariff Recession Is HereMy new forecast, completed in late April, predicts a national recession began as early as March in reaction to Trump’s tarriffs.

Two Key Economic Lessons in One BillHoosiers face trade-offs and opportunity costs in the wake of SEA1.

View archives

Top Tags

jobs and employment 262
economics 203
state and local government 188
education 186
indiana 173
economic development 171
taxes 146
budget and spending 145
law and public policy 144
workforce and human capital 139
Browse all tags
Reporter / Admin Login

October 5, 2014

More Wisdom in Tax Increment Financing

This week a brand new Dick’s Sporting Goods store opens in Muncie near my home. Because my next major sporting goods purchase will be a pair of size 13 wide cleats for my 14-year-old son, I will visit the store shortly. As it turns out, this particular store sits in a Tax Increment Financing district within Muncie, so it raises a lot of important questions about the role of government in supplying athletic footwear to a middle school linebacker.

The structure of Tax Increment Financing (TIF) in Indiana is similar to other states. A piece of property is designated as TIF district (redevelopment district in this case) and increased taxes due to new development are used at wide discretion of the redevelopment commission. In this case, some of the money appears to be directed initially at providing some infrastructure to lure Dick’s and a couple other retailers. Because these TIF districts never go away, the redevelopment commission will have many opportunities over the coming centuries to think of other uses for the money. Not surprisingly this raises many legitimate policy questions.

Muncie is a retail hub for several surrounding counties, but it cannot be said to enjoy a cornucopia of high-end retailers. Of course, improving the retail mix in Muncie would make it a more attractive place to live and bring some new jobs. This is good, of course, and a typical study from accounting consultants add up the new jobs that Dick’s says it will create and that will be reported as the employment benefits. That is nonsense and is why it is as hazardous to ask accountants about the economy as it is to have an economist do your taxes.

As I write this, my son is at football practice and wearing size 12 wide cleats purchased from another Muncie sporting goods store. New cleats from Dick’s won’t be new economic activity, simply a shift in spending from another local store. While a new Dick’s might attract some new spending on sporting goods, the bulk of its sales will come at the expense of other local sporting goods and apparel stores.

Competitive markets are necessary for a growing economy, but in this case Dick’s has been subsidized by taxpayers. That is not competition, but the problem for Muncie is more than simple fairness. Since Dick’s and both other sporting goods stores are in the school district, this TIF will surely limit or reduce future tax revenues for schools.

Most Indiana communities need a lot of work on their quality of place and many need the tool that TIFs provide. But, they also need to think about TIFs more wisely. As a first step the legislature should limit their duration and allow school boards vote on their approval.

I hope this turns out well for Muncie, a city that is finally doing most of the right things. Maybe some of these TIF dollars will find their way to programs in local schools. That’s real economic development. Still, no family needs local government helping us choose where to buy athletic shoes. You have more urgent concerns.

Link to this commentary: https://commentaries.cberdata.org/754/more-wisdom-in-tax-increment-financing

Tags: economic development, incentives, taxes, law and public policy, state and local government


About the Author

Michael Hicks cberdirector@bsu.edu

Michael J. Hicks, PhD, is the director of the Center for Business and Economic Research and the George and Frances Ball distinguished professor of economics in the Miller College of Business at Ball State University. Note: The views expressed here are solely those of the author, and do not represent those of funders, associations, any entity of Ball State University, or its governing body.

© Center for Business and Economic Research, Ball State University

About Ball State CBER Data Center

Ball State CBER Data Center is one-stop shop for economic data including demographics, education, health, and social capital. Our easy-to-use, visual web tools offer data collection and analysis for grant writers, economic developers, policy makers, and the general public.

Ball State CBER Data Center (cberdata.org) is a product of the Center for Business and Economic Research at Ball State University. CBER's mission is to conduct relevant and timely public policy research on a wide range of economic issues affecting the state and nation. Learn more.

Terms of Service

Center for Business and Economic Research

Ball State University • Whitinger Business Building, room 149
2000 W. University Ave.
Muncie, IN 47306-0360
Phone:
765-285-5926
Email:
cber@bsu.edu
Website:
www.bsu.edu/cber
Facebook:
www.facebook.com/BallStateCBER
Twitter:
www.twitter.com/BallStateCBER
Close