What information should governments provide on tax abatements?  

Two small elements of the recent “Megadeals” report from Good Jobs First caught my attention:

  • The lack of data on actual costs, jobs or economic impacts from the listed  projects (which is a topic we are planning to address here at Smart Incentives), and
  • The policy sidebar referring to disclosure and the Governmental Accounting Standards Board (GASB).  Specifically, “. . . GASB has been long-negligent in failing to promulgate regulations for how state and local governments should account for tax-based economic development expenditures – even for entire programs, much less specific deals.”

The GASB website refers to work begun in 2008 and including a research project added in April 2012 to “consider providing disclosure guidance for governments that have granted tax abatements and subsidies.”

Their research leading up to this point found only 6 states out of 44 address reporting requirements for standalone tax abatement programs in their statutes, and only 14 include clawbacks.  Only 1 of 36 counties reviewed offered any reporting on tax abatements after they were received.  So, disclosure is very weak.

The GASB research project states that it only focuses on disclosure of information about abatements, not recognition or measurement of abatements.  The specific questions it is designed to answer are:

  1. Do users need information about tax abatements?
  2. How important is information about tax abatements to the decisions that users make and their assessments of accountability?
  3. What information about tax abatements, if any, should be included in the notes?

This scope is pretty limited.  As of Feb 2013, this research project was only included among the top 8 priority projects.  For now, the research plan for May-August 2013 explains that GASB will “continue additional research on the prevalence and types of tax abatements provided by governments and the information needs of users regarding tax abatements.”

It’s a start.  Sort of.