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Implementing Tax Abatements in Michigan: A Study of Best Practices

Wayne State University

Laura A. Reese

Wayne State University

Heather L. Khan

Wayne State University

Because the use of tax abatements to foster local economic development is widespread despite uncertainty about their effectiveness, is it possible to allocate abatements in a way that increases the likelihood that tangible benefits will result? This research suggests that few municipalities place conditions on abatements, most never evaluate the performance of firms granted abatements, and abatement requests are seldom or never rejected. The project focuses on the implementation of tax abatements, explores the use of tax abatements over a relatively long time period, and makes explicit policy recommendations for more effective policy implementation. Changes in state enabling legislation targeting abatements to distressed areas and adding requirements for evaluation may produce more effective use of abatements at the local level.

Key Words: tax abatements • local economic development

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