INCSpot

The positive fiscal impact of historic tax credits

0
Tuesday, May 29, 2012

For economic development spending, the Holy Grail is a program that pays for itself. This can happen when a state outlay generates economic activity leading to increased tax collections. In a recent analysis of the state historic tax credit for the Urban Land Institute, Ted Carmen shows that there’s a good shot that the state’s historic tax credit achieves this difficult feat. His calculations suggest that, for every dollar that the state puts out, it reaps a $1.20 in new tax revenues.

Compared to other economic development expenditures, the historic tax credit has a significant head start because it is matched by a federal credit. Assuming the projects it supports are only financially feasible with the state tax credit, which is certainly true in many instances, the federal funds follow into the Commonwealth and create economic activity that would not have occurred “but for” the state investment.

Another key feature of the state historic tax credit is that it leads to the production of new housing that would not otherwise be created by the private market. Carmen uses the conservative assumption that each new unit of housing above the state’s baseline production leads to the creation of 0.2 new jobs. This is reflective of the widely held belief among economists that constraints on the state’s housing supply are a drag on job creation. Attributing income taxes paid by workers holding jobs created by the state historic tax credit is critical to appropriately estimating its true fiscal impact.

Posted in: Strong Communities   Jobs and Economic Security   Gateway Cities

Please Login or Create an Account to post your comments.

* = Required
*
*
Forgot Password?

Create an account with us to comment on stories and blog posts. Your account information will not be shared with third parties.

Create Account.
* = Required
*
*
*
*
*
*
*
Privacy Policy

Your information is for commenting purposes only.  MassINC will not distribute or share this information with any outside parties.  We will, however, send you an email inviting you to become part of our network to receive invitations to MassINC events, newsletters and announcements.  If you accept, we will add you to our mailing list.  In commenting, please refrain from using rude or offensive language, profanity or personal information regarding other individuals.

Archive

Sign up to receive a daily roundup of news and ideas from CommonWealth's The Download.