Crony Capitalism and Social Engineering: The Case against Tax-Increment Financing

This report examines the increasingly popular practice of using tax-increment financing (TIF) to promote economic development. TIF works by allowing cities to use the property, sales, and other taxes collected from new developments to subsidize those same developments. While cities often claim that TIF is "free money" because it represents the taxes collected from developments that might not have taken place without the subsidy, there is plenty of evidence that this is not true. TIF takes money away from schools, fire departments, libraries, and other urban services funded by property taxes. By eliminating TIF, state legislatures can help close current budget gaps and prevent cities from taking even more money from these urban services in the future.