Tax Abatement Benefits - An OverviewBalanced economic development of a country rides on the shoulder of an effective tax abatement program that provides benefits to everybody. Unless the value of tax abatement benefits of such a program is commensurate with the assessed value of net new infrastructure development in economically backward areas of a country, the goal of balanced economic development will remain unrealized. To assess the value of these benefits, we must first know what benefits accrue due to participation in a tax abatement program. And this is the scope of this article. Economic development of a country depends on several factors. One of them is Tourism. People from far off including foreigners come to visit historical monuments of a country. Such tourism earns considerable foreign exchange for a country each year. However, if such historic monuments are not preserved properly and are in dilapidated condition, people will not like to visit such structures. Creating tourism revenue under such conditions will become quite difficult. The US government has provided the Mills Act to enable local governments of a county to provide property tax abatement benefits to private owners of certain government listed historical monuments of heritage status in the US. In return, these owners have to sign a pledge and spend money to restore and maintain these monuments. Property tax savings of 40 to 60 percent accrue to such owners each year based on the tourism income approach of value assessment in the case of such historical properties. Owner-occupied historical properties that also serve as family dwellings and even income generating commercial properties may be covered under the Mills Act. Several tax abatement benefits accrue to residents. These benefits include better quality of life, high paying new jobs generated from the reinvestment of tax abatement proceeds into new infrastructure development, retained jobs that are high paying ones. They also include new income opportunities generated due to the entire community's economic growth and increased assessed value that will help offset homeowner's property tax increases. Such increased assessed value arises from land valuation changes, company's investment, and the cascading effect of accelerated business and community growth. Tax abatement benefits to employers include a reduction in the cost for setting up and/or the gradual phasing-in of property taxes and a general sense of camaraderie in employers and also in the community. These benefits also include enhanced community support to local organizations in the sale of a project to their corporate offices. Tax abatement benefits to local governments include new infrastructure developments in the county, which means votes in the ruling party's coffer for any new elections on the anvil. One thing is quite clear. Local governments do not lose out due to tax sops offered to individuals/organizations. Although assessed value controls an individual's tax abatement benefits, it does not affect budgets of local government when viewed in totality. Therefore tax abatement benefits provide a win-win situation for everybody concerned. And this is as it should be. |