Lessons From a Decade of Studying State Economic Development Tax Incentives

Article August 8, 2025

State policymakers can help ensure that economic development tax incentives work as intended by putting in place well-designed evaluation processes that provide the data needed to make those determinations. Since 2011, The Pew Charitable Trusts has helped states evaluate and improve their tax incentives.

In April and May of 2025, Pew hosted four regional webinars for states in the Northeast, Southeast, Midwest, and West, featuring experts from evaluation offices in each area and highlighting how the evaluation landscape has changed over the years.

As Pew winds down its work in this area, the sessions offered insights into states’ experiences in effectively designing, administering, and evaluating tax incentives so that knowledge could be passed on to state evaluation offices and public policy groups. Key takeaways from the webinars include the following:

Evaluation processes are most effective when established by legislation that provides a clear administrative plan, measurable impact criteria, and mechanisms to inform policy decisions. States differ widely in how they design both the evaluation processes and the evaluations themselves.
Evaluations should cover four key components: a description of the incentive, its history, and goals; an assessment of the program’s design and administration; an estimate of its economic and fiscal impacts; and policy recommendations.
Incentives tend to be most effective when they target companies that sell goods beyond state borders, have a greater local economic impact (e.g., paying higher wages or using local suppliers), and are locally owned. It’s also best when the incentives operate under shorter timelines, have built-in mechanisms to monitor and control costs, and are targeted to labor markets with higher unemployment.
In addition to the potential economic benefits, incentives have costs. The amounts, however, depend on indirect impacts, such as changes in population, responsiveness of real estate markets, and how policymakers balance their state’s budget.

The online sessions featured speakers from evaluation offices who shared their experiences and lessons from doing this work on behalf of their states or cities. Among them were:

Sarah Parker from New York City’s Independent Budget Office.
Ellen Miller from Virginia’s Joint Legislative Audit and Review Commission.
Carlos Guereca from Minnesota’s Legislative Budget Office.
Pete van Moorsel from Washington’s Joint Legislative Audit and Review Committee.

Speakers emphasized the importance of educating policymakers about how tax incentives can complement or sometimes conflict with one another and why evaluations matter. They highlighted the value of tailoring evaluation results to different audiences. Washington, for example, provides one-page summaries and video briefings to make its work easy to understand.

They also discussed a common evaluation challenge: limited data. When policymakers lack sufficient information, Virginia’s Miller said, they should use a scorecard to rate incentives against program design best practices, allowing them to better estimate the potential impact. Meanwhile, Parker of New York recommended outlining the ideal data scenario for rigorous analysis, identifying current limitations, and suggesting improvements for future data collection.

Speakers encouraged participants to leverage the experiences of others—for example, examining how they chose their methodologies, what data was required, and how they use staffing and computing resources. Although there is no one-size-fits-all approach for incentive design and evaluation, states can learn valuable lessons from one another.

As Pew transitions out of this line of work, we are passing the accumulated knowledge to state partners, including legislators, policy analysts, and policy groups. Pew’s Economic Development Incentive Evaluation Toolkit contains reports, webinars, technical assistance memos, testimonies to state legislatures, and presentations from a decade of research and analysis. In addition, the National Conference of State Legislatures maintains a database of more than 250 state and city incentive evaluations organized by analysis topic and incentive type, as well as recorded presentations from past incentive evaluators conferences.

Several other organizations have expertise in incentive design and evaluation, including the Government Financial Officers Association, Upjohn Institute, Smart Incentives, State Economic Development Executives Network, and the Center for Regional Economic Competitiveness. Finally, and perhaps most importantly, more than 30 states plus New York City, Philadelphia, and Washington, D.C., have evaluation processes, providing a strong network of experts.

By sharing these resources, Pew hopes that states will continue to redefine and strengthen their tax incentive programs. Recordings for each of these webinars can be found through the links below.

Elizabeth Gray works on The Pew Charitable Trusts’ state fiscal health project.