An Analysis of State and Local Industrial Tax Exemption Programs

During the post World War II period, a major expansion occurred in the use of tax and financial inducements by state and local governments to attract industry and thereby promote regional economic growth. The financial inducements used by state and local governments may be classified as tax exemptions, subsidies and changes in the state or local tax structures for the purpose of attracting industry. The most extensively used subsidies are local aid through industrial development bond-financing and state aid in the form of guaranteeing mortgage loans made by private institutions, purchasing second mortgages on industrial property, and making loans to local development corporations for development and construction of private industrial facilities. The common forms of tax exemptions include complete or partial exemption of land, buildings, equipment and inventories from ad valorem taxes for periods of five to ten years.