ON TO 2050, the region’s comprehensive plan, calls for local governments to reform their use of development incentives. The Chicago Metropolitan Agency for Planning (CMAP) conducts and publishes analysis on local development incentives in support of this plan recommendation.
The use of tax incentives to recruit or retain businesses at the local level is common. Types of local tax incentives utilized regularly in northeastern Illinois include tax increment financing (TIF), sales tax rebates, business district tax rebates, property tax abatements, and Cook County property tax incentive classifications. In 2020, CMAP research found that 216 of the region’s 284 municipalities — over 75 percent — use some type of local tax incentive, as do many other local governments, such as counties and school districts.
However, there are drawbacks to local incentive use, including high costs, diminishing returns, damaging intra-regional competition, underutilized opportunities to promote equitable growth, and other challenges. These limitations, which are well established in local and national academic research, make local incentives less effective in achieving local and regional goals.
To enhance metropolitan Chicago’s economic and fiscal positions, CMAP supports incentive reform by local governments within a larger program of smart, regional economic development. CMAP research advances these goals by publishing data and analysis on the following topics:
The prevalence and distribution of local incentives
Motivations for incentive use by local governments
The fiscal and economic impacts of local incentives
Strategies and best practices for improvement and reform