TN business incentive tally: $2.5B per year (double national average)

A study by the W.E. Upjohn Institute for Employment Research indicates Tennessee state and local governments provide more than $2.5 billion in business incentives annually. That’s nearly 1 percent of the state’s private-sector gross domestic product and makes Tennessee fourth highest in the nation, the study’s author, Timothy Bartik, tells The Tennessean.

In exchange for taxpayer support, businesses are expected to generate jobs and spur economic growth. State and local leaders point to success stories — new companies attracted by economic development packages. But there’s an inherent trade-off for the taxpayer. Grants and tax revenue could instead be directed to improve schools, fix crumbling highways and other key government functions.

The analysis, “A New Panel Database on Business Incentives…in the United States” leads to some key questions: how much is enough? And are the incentives designed to attract well-paying jobs, or dead-end work with little or no benefits? (Note: You can download a copy HERE.)

Bartik, a senior economist at the Michigan-based think tank, found that states with high levels of incentives don’t have significantly better economic performance than their neighbors.

“If incentives have an effect, it’s at best relatively modest,” he said.

Compared with neighboring states, Tennessee leads the way. Incentive levels are 91 percent lower in Virginia, for instance, and 82 percent lower in Georgia. As of 2015, Tennessee’s incentives are 105 percent higher than the national average.

The state stands out for its property tax abatements, the analysis found. In these deals, local governments typically agree to forgo property taxes if a company commits to creating a certain number of jobs and investing a certain about in capital. Because companies make annual payments in lieu of taxes, the arrangements are called “PILOTs.”