Tax Increment Financing and Missouri: An Overview of How TIF Impacts Local Jurisdictions

Abstract

In spite of TIF's [Tax increment financing] obvious importance to policy makers and developers, the general public and even many policy makers lack a fundamental understanding of TIF and how its use impacts local economies. The goal of this policy study is to provide the general public and policy makers with a thorough and accessible understanding of the economics of TIF. The study will begin by presenting a basic model of how TIF finances development and how it can serve as an incentive for development. The paper will then discuss how TIF differs from other economic development incentives and how this difference can result in either a sharing of development costs among overlapping jurisdictions or the capturing of school district and county tax revenue by the municipality. Next the paper will discuss TIF's role in economic development and tax competition along with the importance of the shifting of economic activity and the but-for provision. The paper will follow with a review of the academic literature's empirical findings on TIF and will then provide an overview of TIF use in Missouri. Finally the study will offer some concluding remarks.