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Property Tax Incentives 101: Pros and Cons

Property Tax Incentives 101: Pros and Cons. Presentation to the Windsor-Essex Policy & Solutions Forum Enid Slack Institute on Municipal Finance and Governance Munk School of Global Affairs University of Toronto May 15, 2014. Property Tax Incentives 101. What are they?

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Property Tax Incentives 101: Pros and Cons

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  1. Property Tax Incentives 101: Pros and Cons Presentation to the Windsor-Essex Policy & Solutions Forum Enid Slack Institute on Municipal Finance and Governance Munk School of Global Affairs University of Toronto May 15, 2014

  2. Property Tax Incentives 101 • What are they? • Do they work? • What are the arguments for them? • What are the arguments against them?

  3. What are Property Tax Incentives? • Temporary reduction in property taxes to attract new business to a particular location • Ontario – tax increment equivalent grants (TIEGs) • TIEGs -- municipalities provide a grant to a new business to cover a portion of the property tax increase that business faces

  4. Do Property Tax Incentives Work? • Property taxes matter more within metropolitan areas than between metropolitan areas • Impact is less if other jurisdictions introduce incentives • Size of tax differential matters • Type of business activity matters • Services matter – if lower taxes mean fewer services, they are unlikely to attract business

  5. Arguments for Property Tax Incentives • Benefits to community outweigh the costs – attracts businesses that bring more in local revenues than they consume in services (plus environmental impact) • New investment brings other benefits to community (agglomeration economies) • Shows municipality is pro-business • Brownfields – otherwise won’t be developed

  6. Arguments Against Property Tax Incentives • Wasted on firms that would have located there anyway • Can lead to situation where no major investments occur without incentives • Zero-sum game – development in one location at expense of development in another location – no overall increase in business activity • Lower taxes for some firms mean (i) higher taxes for other taxpayers or (ii) reduction in services

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