Overview

Economic development incentives are one of the primary tools states use to try to strengthen their economies. Every state uses a mix of tax incentives, grants, and loans in an effort to create jobs, encourage business expansions, and achieve other goals. Collectively, states spend billions of dollars a year on incentives, which can significantly affect their budgets, businesses, and economies. To make these programs work as well as they can, states need good data. Data are necessary for officials to administer incentives and measure their effectiveness. There are multiple sources of these data. Relevant information can come from businesses, federal records, and other third-party databases. In fact, states already possess, in some form, much of the data they need. But they must ensure that the right people have access to these data; the information needs to be of high quality and analyzed effectively. Many states have struggled with these challenges, leaving officials without the information they need to administer incentives well and policymakers unsure of whether the programs are working as intended.

The business incentives initiative provided strategies on how states can:

• Share relevant data.
• Ensure data are high-quality.
• Analyze data effectively.

Incentive data challenges states face

States need good data for at least three discrete tasks that are necessary to design and administer effective incentive programs. First, state officials must determine which companies should receive incentives. Then, states need to monitor the performance of participating companies to ensure they are meeting their commitments in exchange for the incentives. Finally, states should analyze the results of incentive programs to identify ways to make these policies more effective. For each of these tasks, states have often struggled to effectively collect, share, and use data. Different parts of state government may not collaborate effectively with one another. Both the data and responsibility for analyzing it are diffuse: Numerous agencies have a role in administering incentives, studying them, and collecting relevant tax and economic information. Likewise, much of the information is sensitive—such as the business plans or tax records of specific companies—so state agencies are sometimes reluctant to share it even with one another.