Spotlight Report

Lotteries and Economic Incentives: Governments need better tools to evaluate tax breaks

posted on in City & County Government, Economic Growth & Development, Government Reform, Law & Regulation
Featured Image

Key facts:

  • Business incentives are like lottery tickets, providing big rewards for governments if you don’t count the costs.
  • Government officials decry the perceived need to give incentives to companies.
  • Rarely do they examine the full costs and benefits of incentive packages.
  • Iredell County modeled the financial costs and benefits of an incentive offered in 2009 and showed a positive net present value for the incentives.
  • Any model should factor in
    1. the opportunity cost of forgoing the next best use for the funds
    2. the likelihood the investment would have happened without an incentive.
  • The Iredell model did neither of those.
  • Factoring in opportunity cost would have reduced the benefit but left the incentive with a positive net present value.
  • Factoring in the likelihood of investment without the incentive would have turned the incentive to a money-losing proposition.
  • More incentives should be measured that way.

Spotlight 398 Lotteries and Economic Incentives: Governments need better tools to evaluate tax breaks

As Senior Fellow, Joe examines fiscal and tax policy. He previously headed the North Carolina Government Efficiency and Reform initiative within the Office of State Budget and Management, which led to changes in automotive fleet management, natural and… ...

Donate Today

About John Locke Foundation

We are North Carolina’s Most Trusted and Influential Source of Common Sense. The John Locke Foundation was created in 1990 as an independent, nonprofit think tank that would work “for truth, for freedom, and for the future of North Carolina.” The Foundation is named for John Locke (1632-1704), an English philosopher whose writings inspired Thomas Jefferson and the other Founders.

The John Locke Foundation is a 501(c)(3) research institute and is funded solely from voluntary contributions from individuals, corporations, and charitable foundations.