Six U.S. States exemplify "Best Practices" in Transparency and Evaluation of the Economic Impacts of Incentive Programs

In its Incentive Transparency Index - presented at IEDC 2013 - ICA's team used its proprietary software tool ICAincentives.com to assess US states on their openness in communicating the economic and social impacts of incentive programs. ICA also recently cross-referenced these findings against research from PEW Charitable Trusts on the evaluation of the effectiveness of such incentives. Findings show that evaluation and openness appear to go hand–in-hand; states that score high on evaluation also score high on openness and vice versa.  This correlation seems to contribute substantially to the overall performance and quality of tax incentive programs, as those states that perform well on openness and in evaluating effectiveness offer more high-quality incentive programs.

“It’s gratifying to note that there is a positive correlation between transparency and effectiveness. This strongly suggests that effectiveness is also correlated with a clear establishment of goals on behalf of the public sector. We suspect that this is another reason why so many states are looking to enhance the transparency of their programs,” stated Chris Steele, COO and President North America. Laurens van der Schoor, analyst, further comments: "The value of this comparison lies in the fact that the high degree of similarity between the two studies in terms of US state performances further validates the quality and results of the two individual studies. This in turn provides more evidence-based proof for Best and Worst Practice incentive programs among US states." 

“Best Practice” states (i.e. those with strong openness and leading the way in terms of evaluating incentive programs) include Connecticut, Louisiana, Iowa, Missouri, New Jersey and Wisconsin, while 17 states fall under the “Worst Practices” category, exhibiting poor evaluation mechanisms and weak openness. Nebraska, Nevada and Texas are the states with the most “average” performance as these states are placed in the middle scoring group in both rankings.

Communicating impacts of incentive programs requires an evaluation of the effectiveness of the incentive program, further emphasizing the mutual dependence of each element. Thus, advancing transparency and effectively evaluating incentive programs could assist policy makers in better assessing the costs and benefits of their incentive programs.

To request a copy of the research or for further information on the comparison please contact Laurens van der Schoor at +31 20 262 2980 or at [email protected].