IN TRYING TO maintain momentum in the Innovation District in the South Boston Waterfront, Boston has dangled millions of dollars in tax breaks in front of companies settling there. It was hardly a radical gesture in the world of economic development. The policy has become so common over the last 50 years that state and local governments across the country are routinely forgoing up to $10 billion in revenue every year. However, there is little evidence that property tax incentives actually work — either in the decision-making process for companies choosing their locations, or in terms of promised economic activity or new jobs. Our research, published this week by the Lincoln Institute of Land Policy, identified three obstacles that impede the success of property tax incentives as an economic development tool. First, incentives are unlikely to have a significant impact on a firm’s profitability, since property taxes are a small part of the total costs for most businesses — averaging less than 1 percent of total costs for the US manufacturing sector.
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