Business Taxation

Business tax incentives lower taxes paid by target business in order to promote a public goal. Such policies include business property tax relief, tax increment financing, Enterprise Zones, and Illinois’ High Impact Business Program. Together these incentives, and particularly tax increment financing, represent a substantial investment in Illinois’s public works and infrastructure.

IGPA’s Business Tax policy initiative brings together experts in economics and public finance to evaluate the effects of such policies on the health and productivity of state and local businesses and the state government. The researchers seek to measure the direct effect on firms that receive tax incentives as well as the indirect effect on nearby firms that do not receive incentives. 

The research approach is based on long-established scholarly theory. The researchers are also contributing new ideas to the policy conversation. For example, the research emphasizes the role of local government market power in setting optimal levels of incentives. The scholars focus on trade-offs between taxes and business incentives.

The initiative compiles original data on business taxes and business tax incentives from a variety of sources. The researchers also work with Illinois government agencies to obtain access to non-public data on local economic conditions when appropriate. The goal of the initiative is to inform and improve the design of local and state business tax and incentive policy in Illinois.

IGPA pursued this initiative from 2017 to 2019.

Share:

There is an important balance to strike between the revenue business taxes generate, and the effects they have on the business climate and economy. We seek to provide solid evidence on the effects of business taxation so that elected officials can make informed decisions about future policy.

Affiliated Experts

James J. Stukel Presidential Professor

David F. Merriman is the leader of IGPA's Working Group on the Fiscal Health of Illinois. His major area of study is state and local public finance. Merriman directs The Fiscal Futures Project, which created and maintains of a comprehensive and consistently defined measure of the Illinois state budget.  He has published extensively about the effect of tax increment finance policy on local economic growth and the determinants of tobacco tax avoidance. He has also studied Walmart’s impact on urban economic development. His most recent research concerns state and local business taxation.