Does It Work? The Evidence For and Against

Everyone in this fight can point to a factory. Supporters point to the plant that opened after the city ran water and sewer to an empty field. Skeptics point to the same plant and ask whether it would have come anyway. The research cannot settle every local case. It does say a fair amount about the typical one, and that is worth knowing before the next hearing.

The case for

Infrastructure comes first. Supporters' best argument is about timing. A food plant needs water storage, wastewater capacity and rail or road access before it can open, and a small city cannot bond for that on the hope that a company arrives. Tax increment lets the city pay for the pipes out of the value the plant later creates. The Twin Falls agency's 2016 agreement to reimburse Chobani for a water storage tank, a wastewater equalization tank and site cleanup, payable only from the Chobani area's own increment, is a textbook case (lesson 5). The Association of Idaho Cities has called urban renewal an economic development tool that has helped revitalize downtowns. The Redevelopment Association of Idaho, which represents agencies, argued against the 2025 dissolution process because long-term projects need certainty.

Idaho competes with its neighbors. Commerce has defended the Tax Reimbursement Incentive as the way Idaho competes with states like Utah for expansions, in a 2016 editorial posted on its site. Its 2025 annual report estimates a $7.60 return in state revenue for each dollar of TRI credit, a figure its footnote says leaves out "direct, indirect, or induced estimated tax impacts."

Big plants can lift the businesses around them. The strongest academic evidence on this side comes from Michael Greenstone, Richard Hornbeck and Enrico Moretti, who compared counties that won a large new plant with the runner-up counties the company also considered. Five years after the opening, existing plants in winning counties had total factor productivity 12 percent higher than in losing counties, with bigger gains for plants sharing workers and technology with the newcomer. Wages rose too, which cuts into the gain for local employers but is good news for workers.

Without the deal, the plant goes elsewhere. In Twin Falls, Chobani says its expanded plant will employ more than 1,200 people at wages almost 12 percent above the regional average. A Chobani lobbyist told legislators in 2025 that the urban renewal change was "a way Idaho can grow with a growing business."

The case against

Most subsidized decisions were going to happen anyway. Timothy Bartik of the W.E. Upjohn Institute reviewed 34 estimates from 30 studies and concluded that typical incentives "probably tip somewhere between 2 percent and 25 percent of incented firms" (Upjohn, 2018). Put the other way, at least 75 percent of the companies that received incentives would have made a similar location or expansion decision without them. He also found many incentive studies likely overstate the effect.

Deal-specific subsidies buy jobs in one industry and little broad growth. Cailin Slattery and Owen Zidar's 2020 review in the Journal of Economic Perspectives found the average discretionary subsidy was about $178 million for about 1,500 promised jobs. Winning locations did gain roughly 1,500 jobs in the deal's industry compared with runners-up. But the authors "do not find strong evidence that firm-specific tax incentives increase broader economic growth."

District growth proves nothing. Richard Dye and David Merriman's Illinois research on tax increment financing, covered in the property tax course, found that the parts of TIF-using cities outside the districts grew no faster, and perhaps more slowly, than in comparable cities without TIF.

Appointed boards spend money elected boards would control. This is the accountability argument, made in Idaho most forcefully by the Idaho Freedom Foundation, whose president, Wayne Hoffman, joined other taxpayers in suing Boise over two urban renewal districts the city approved at the end of 2018, arguing they violated the constitution's voter-approval rule for debt. The Foundation has long argued that urban renewal diverts taxes that would otherwise pay for parks, public safety and other services. The suit failed on standing in Hoffman v. City of Boise (2021), without a ruling on the merits of the policy. Commerce's own 2016 editorial named the Foundation among critics of TRI and described those critics as believing it unfairly helps newcomers compete against established Idaho businesses. Liberty-minded critics, this site's publisher among them, extend the argument to the regional groups in lesson 7: public money and agenda-setting power exercised outside the reach of voters.

The Legislature keeps narrowing the tool. Lawmakers reset bases on plan changes (2016), carved highway districts out of many new areas (2020), added qualifying data center value to the base (2023), and let fire and ambulance districts out while spelling out a dissolution process (2025). Most of those changes took increment away from agencies, and critics read the pattern as lost confidence in the tool. The same 2025 bill also let single-owner manufacturing areas run up to 20 more years, so the direction is not all one way.

The arithmetic that matters: cost per induced job

Programs report cost per promised job. The relevant number is cost per job the incentive actually caused.

Nobody knows the true induced share for a given Idaho deal. That is the point. A program that reports results as if the share were 100 percent is reporting its best case as fact.

Where the evidence points

On the central question, the research is fairly consistent. Most incentives do not change most decisions. Big, deal-specific packages reliably produce jobs in the targeted plant and its industry, sometimes with real productivity spillovers, but rarely measurable growth in the wider economy. Growth inside a tax increment district is not evidence that the district caused it. Those findings come from economists of varied politics and methods.

Where the evidence is weaker or mixed: whether infrastructure-first TIF for a specific employer, in a small rural city with no other way to finance pipes, changes outcomes more often than the national averages suggest. Rural Idaho cases like the Magic Valley food plants are exactly the ones studies have the least data on.

And the accountability argument does not depend on the economics. Even an incentive that works raises the question of who decided, in what forum, and on whose behalf. That is a question about consent, and residents are entitled to answer it for themselves.

If your community does offer incentives

Term	What it does	Example in this course
Pay-as-you-go reimbursement	Pays only from increment the project actually produces	Twin Falls Chobani and Orchard Drive East agreements
Hard cap and end date	Limits total exposure; unpaid balances expire	$2,414,302 cap, expires December 31, 2042
Company guarantee of bonds	Puts default risk on the company	Chobani guarantee of the 2013A bonds
Performance-based credit	No payment until jobs and taxes appear	TRI's minimum job rule
Clawback	Recovers money if commitments are missed	TRI agreements must state "consequences of default" (67-4740)
Public evaluation	Compares projections with actual results	TRI annual report; urban renewal annual reports