Tax Increment Financing: History, Basics, Issues, and Evolution

Abstract

As municipal governments seek to maintain an urban center, many tools and incentives are used. One of these is tax increment financing. This development tool has the potential to provide tax-base neutral funding for areas in blight, potentially blighted, or with the potential to be economically and socially active. As municipal government officials, business leaders, and active citizens engage in civic discussion regarding economic development tools, it is important to understand the history, terminology, pitfalls, and current legislative trends. This paper provides an overview of the institutional history, basic functioning, debates, and current evolution of tax increment financing.