Back in December 2018, the Show-Me Institute published TIF-for-Tat: The Relationship Between Political Contributions and Tax-increment Financing Awards. A new nationwide study reaches similar conclusions about incentives offered at the state level.
The Institute paper, written by myself and Elias Tsapelas, looked at political campaign giving in Kansas City and found that:
The number of donations made to the campaigns of public officials who have decision-making power for TIF awards appears to increase in the election cycle in which developers apply for a TIF and then fall off in the election cycles afterward.
Companies might describe political giving as a sign of good corporate citizenship, and that may be true. But the fact that the contributions drop after a tax-increment financing (TIF) plan is awarded suggests something more akin to a quid pro quo.
A new study by Cailin Slattery at Columbia and Owen Zidar at Princeton/NBER also links economic development incentives to political campaign activity. They find:
The interaction between an incumbent governor and an election year is highly correlated with increases in incentive spending, suggesting a strong role for political determinants of incentive provision. In the raw data, per capita incentive spending increases by more than 20% in half of the cases in which it is an election year and the Governor is up for re-election versus one-fifth of the cases otherwise.
This study also finds, as do many other serious studies of economic development incentives, a “lack of clear spillovers and equity benefits.”
If a particular public policy shows no substantial benefit to taxpayers, and yet seems to rise and fall based on relationships to political contributions and campaigning, it is reasonable to conclude that there are darker motives at play than the public good. Isn’t it about time Missouri and its various municipalities rein in these incentives in the name of good and efficient government?
