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Patterns of Tax Abatement Policy: Lessons From the Outliers?

¹ Michigan State University
² Wayne State University

^* To whom correspondence should be addressed. E-mail: reesela{at}msu.edu.

	Abstract

This paper uses a unique database that includes municipal tax abatements granted in the State of Michigan over the past two decades. The time series nature of the data allows for identification of patterns in abatement use. Of particular interest, are the outliers; municipalities that have gone through most of the time period forgoing abatements, only to begin using them in earnest within the last five years and those that began using abatements early and consistently but in more recent years have begun to offer significantly fewer abatements. Specifically, the following questions are addressed:

• What are the patterns of abatement use over the past 26 years among municipalities in Michigan?

• What is the extent of deviation from past findings that abatement use is highly path dependent?

• What types of communities are likely to be early, as opposed to late, starters?

• How often are municipalities able to stop using abatements once they have begun?

• What circumstances cause cities to rely heavily on abatements over time and then, if not stop, at least reduce the flow?

• What public policy lessons can be learned from these outlying cases?

First published on August 5, 2009
The American Review of Public Administration 2009, doi:10.1177/0275074009340051


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