A Case for and Against Tax Incentives
TAX INCENTIVES
Alex Easson and Eric M. Zolt*
OVERVIEW........................................................................................................................1 I. THE CASE FOR AND AGAINST TAX INCENTIVES..........................................6 A. Convention Wisdom ............................................................................................6 B. Advantages of Tax Incentives..............................................................................9 C. Disadvantages of Tax Incentives.......................................................................10 1. Different types of costs associated with tax incentives ..............................10 2. Estimating the costs of tax incentives.........................................................13 D. Sunset provisions and evaluation of success of specific tax incentive initiatives .................................................................................................................14 II. TYPES OF TAX INCENTIVES .............................................................................15 A. Objectives of Tax Incentives..............................................................................15 B. Targeting of Incentives......................................................................................15 C. Forms of Tax Incentives ....................................................................................18 D. Economic Effects of Tax Incentives...................................................................24 III. COMMON DESIGN ISSUES.................................................................................25 A. Eligibility Criteria.............................................................................................25 B. Operational Features of Incentive Provisions ..................................................27 1. Depreciation Rules .....................................................................................28 2. Loss Rules
Alex Easson and Eric M. Zolt*
OVERVIEW........................................................................................................................1 I. THE CASE FOR AND AGAINST TAX INCENTIVES..........................................6 A. Convention Wisdom ............................................................................................6 B. Advantages of Tax Incentives..............................................................................9 C. Disadvantages of Tax Incentives.......................................................................10 1. Different types of costs associated with tax incentives ..............................10 2. Estimating the costs of tax incentives.........................................................13 D. Sunset provisions and evaluation of success of specific tax incentive initiatives .................................................................................................................14 II. TYPES OF TAX INCENTIVES .............................................................................15 A. Objectives of Tax Incentives..............................................................................15 B. Targeting of Incentives......................................................................................15 C. Forms of Tax Incentives ....................................................................................18 D. Economic Effects of Tax Incentives...................................................................24 III. COMMON DESIGN ISSUES.................................................................................25 A. Eligibility Criteria.............................................................................................25 B. Operational Features of Incentive Provisions ..................................................27 1. Depreciation Rules .....................................................................................28 2. Loss Rules