Does Redevelopment Increase Tax Revenues? No, Says a New Study

A new study by the Mercatus Center of George Mason University brings us the dispatch that the familiar redevelopment projections of higher revenue are not true. See Carrie B. Kerekes and Dean Stansel, Takings and Tax Revenues: Fiscal Impacts of Eminent Domain, Mercatus Center Report, October 2014. See http://mercatus.org/sites/default/files/Kerekes-Eminent-Domain.pdf

Here is the abstract:

“This paper provides the first examination of the relationship between eminent domain activity and the growth (and level) of state and local revenue. We restrict our attention to takings that are for private use, such as the one that led to the landmark Kelo decision in 2005. One of the arguments used by the proponents of such takings is that they will lead to higher levels of tax revenue for state and local governments. Using data on the number of takings for private use, we find virtually no evidence of a positive relationship between eminent domain activity and the level of state and local tax revenue. We find some limited evidence of a negative relationship between eminent domain and future revenue growth. These findings are robust to a variety of model specifications. They have important implications for contemporary public policy debates on this issue.”

This reminds us of the great line of Macklin Fleming, former Justice of the California Court of Appeal, who observed in one of his opinions (Regus v. Baldwin Park) that proponents of redevelopment projects are fond of asserting that their proposed projects will bake a bigger economic pie, with bigger shares for all, but in reality, what they often produce is pie in the sky.

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