Pew study gives Nevada low marks for evaluating effectiveness of tax incentives

By Sean Whaley, Nevada News Bureau: A new study by the Pew Center on the States identifies Nevada as one of 16 states that did not publish a document between 2007 and 2011 that evaluated the effective of tax incentives.

Nevada received a poor grade in the study: Evidence Counts: Evaluating State Tax Incentives for Jobs and Growth. The study identified 13 states leading the way in conducting such evaluations, another 12 showing mixed results and the remainder, including Nevada, that “have not taken the basic steps needed to know whether their incentives are effective.”

Courtesy of the Pew Center on the States.

The study found that every state has at least one incentive program and most have several. States offer credits, exemptions and deductions to businesses in specific industries, such as manufacturing or movie production. They also give them to firms willing to locate in struggling neighborhoods, or to firms that pledge to hire new workers.

The Nevada Legislature’s Fiscal Analysis Division conducted a review of the state’s tax abatements and exemptions authorized under Nevada law. The 294-page report, released in February of 2009, identified several tax abatements, tax exemptions and tax incentives, including those for new or expanding businesses and for “green building” construction.

Efforts to create tax incentives in Nevada have been mixed. A bill introduced in the 2011 legislative session that would have offered transferable tax credits to attract filmmakers to Nevada did not win approval.

But a $10 million Catalyst Fund created by the 2011 Legislature to help aid in business expansion and economic development did see approval. It is a component of Nevada’s new Governor’s Office of Economic Development, which in February released its plan to grow and diversify the state economy.

The plan includes benchmarks to assess whether Nevada is achieving its ambitious job-creation goals. Gov. Brian Sandoval has called for the creation of 50,000 new jobs by the end of 2014.

“Policy makers should know whether these tools deliver a strong return on their investment,” said Jeff Chapman, senior researcher, Pew Center on the States. “Regular, rigorous, and comprehensive evaluations of tax incentives are critical to their ability to do so.”

Pew reviewed nearly 600 documents and interviewed more than 175 government officials and experts to examine how – and how well – states gauge the effectiveness of their tax incentives, if they do so at all. The study does not take a position on whether tax incentives for economic development are good or bad, but does identify promising approaches to evaluation.

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