Tax Increment Financing

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Tax Increment Financing

The City of Balitmore City, the Parking Authority of Baltimore City, The Baltimore Development Corporation and private developers are involved in a $83MM project that combines, retail, residential, and parking in a downtown area. That’s pretty normal, and go for it Baltimore.

They are using a technique called Tax Increment Financing to pay for the city’s portion (about 10%) of the deal.  That concept was new to me so I looked it up.

The idea is that if an area is upgraded with development, the property will be more valuable, and if the property is more valuable, it will generate more taxes. That "increment" of increase of taxes will be used to pay off the bonds that allowed the project to proceed. In other words, the government entity is using future taxes that will be generated off the project to pay off the project.  Pretty spiffy idea, really.

Actually it works much like a tax cut.  If one cuts the tax rate, there is more money for investment. That investment generates more business, and that business pays taxes.  And as has been proven time and time again, that increase in business creates far more taxes than the amount that was lost by the
tax cut.  This is the Lauffer Curve. Works every time.

JVH

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John Van Horn

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