Evaluating Discretionary and Nondiscretionary Incentives

Economic development incentives employed by state and local governments vary in myriad ways. A good typology of these incentives could be based on many different features, including whether the program offers:

• A tax incentive or a direct financial subsidy.
• A tax exemption, deduction, or credit.
• A preference claimed against income, sales, or other tax.
• Low-cost loans or loan guarantees.

These are all key features, but probably the overriding feature of an incentive program is whether it is nondiscretionary (by right) or discretionary (negotiated).