Tax incentive

Total or partial exemption from tax A tax incentive is an aspect of a government's taxation policy designed to incentivize or encourage a particular economic activity by reducing tax payments. According to a 2020 study of tax incentives in the United States, "states spent between 5 USD and 216 USD per capita on incentives for firms." There is some evidence that this leads to direct employment gains but there is not strong evidence that the incentives increase economic growth. Tax incentives that target individual companies are generally seen as inefficient, economically costly, and distortionary, as well as having regressive economic effects. Tax incentives can cause negative effects on a government's financial condition, among other negative effects, if they are not properly designed and implemented. Corporate tax incentives Corporate tax incentives can be raised at federal, state, and local government levels. For example, in the United States, the federal tax code provides a wide range of incentives for corporations, totaling $109 billion in 2011, according to a Tax Foundation Study. The Tax Foundation categorizes US federal tax incentives into four main categories, listed below: