Do Wisconsin Tax Increment Finance Districts Stimulate Growth in Real Estate Values?
Economic development is one of the central tasks of local government in the United States. In recent years local governments around the country have made wide use of a somewhat obscure and indirect tool call “tax increment finance” (TIF) as a major mechanism to promote real estate development. We use data on all Wisconsin municipalities during the period 1990 to 2003 to study the effect of TIF on economic development. We use panel data estimation techniques to regress non-TIF and aggregate property values on variables that measure TIF use and control variables. We also use appropriate techniques to examine the potential endogeneity of TIF use. We find evidence in support of three primary hypotheses, all else equal: (1) equalized assessed valuation grows faster in TIF than non-TIF portions of the municipality; (2) non-TIF portions of municipalities with a TIF grow more slowly than they would have in the absence of TIF; and (3) TIF has a small positive net effect on aggregate land values
