Tax increment financing doesn’t create jobs, according to research by a Washburn University professor. In a working paper for the Mercatus Center and the Missouri Show-Me Institute, professor Paul F. Byrne examines the number of jobs reported to have been created in Missouri by TIF and compares those to Bureau of Labor Statistics county employment numbers.
“Results suggest the number of jobs reportedly created by TIF districts do not significantly impact county employment,” Byrne writes.
TIF financing allows developers to divert property taxes generated from defined area to fund infrastructure related to a project. The end result is tax subsidy for developers that redirects the risk of development from the developer to the taxpayers. The city of Kansas City, Missouri, authorized a TIF to fund the Power and Light District. There are a handful of active TIF projects in Wichita, including Warren Theater in Old Town and the Save-A-Lot grocery store.
When TIFs were first established in California in 1952, the goal was to fund infrastructure in blighted areas. Today, 49 states use TIFs, but their primary role today is as an economic development tool, or a project’s ability to attract jobs. In Missouri, TIF administrators are required to report each year estimated new jobs and jobs retained due to the TIF creation.
Bryne’s paper theorizes that the number of jobs created should show a positive and measurable impact on BLS numbers, but that’s now what Byrne’s research revealed. He writes that many TIF districts experience growth within their geographic boundaries, but it’s difficult to pinpoint whether that is growth that would have occurred elsewhere if a TIF district didn’t exist.
Byrne lists a KCMO TIF to develop and consolidate IRS staff in the city. Byrne writes that though there were no IRS employees working in the TIF district prior to the development, many of the jobs that relocated moved from an IRS office on Bannister Road in another part of the city. Another 1,800 jobs relocated from Overland Park–just across state line.
“So while the TIF district itself clearly experienced a significant growth in economic activity, jobs and related taxes, when considering the impact on the entire municipality, the decrease in economic activity, jobs and related taxes…offsets a large portion of these gains,” Byrne writes.
He concludes that TIF-supported jobs “either come at the expense of other areas in the county or would have located in the county regardless of the existence of Missouri’s TIF districts.”
In a blog post, Patrick Tuohey, director of Municipal Policy at the Show-Me Institute, said TIFs divert money from municipalities that would otherwise go to support schools and other basic services.
“Research from all over the country tell us that it does not create jobs, does not spur investment, and does not mitigate blight,” he writes. “It’s time for reform or elimination altogether.”
Read the Meracatus working paper, here.