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Monday Map: State Tax Incentives for Business

By: Nick Kasprak

Today's map looks at three tax creditA tax credit is a provision that reduces a taxpayer’s final tax bill, dollar-for-dollar. A tax credit differs from deductions and exemptions, which reduce taxable income, rather than the taxpayer’s tax bill directly. s for businesses: job creation, research and development, and investment. States often use such taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. incentives to encourage businesses to move in, though these methods tend to be distortionary and favor certain types of businesses over others. (People are occasionally surprised to learn that our State Business Tax Climate Index penalizes states for having tax incentives. Our view is that it's more efficient and neutral to tax everyone equally – tax incentives are a way to disguise government subsidies as deferred revenue. A better method to encourage businesses to move in is to lower tax rates across the board.)

The map is below. Many states offer all three types of incentives, while two (Alaska and Michigan) offer none.

Click on the map to enlarge it.

Previous Monday Maps are available here.