Does Chicago’s Tax Increment Financing (TIF) Program Pass the ‘But-For’ Test? Job Creation and Economic Development Impacts Using Time Series Data

Chicago uses Tax Increment Financing (TIF) to promote economic development to a greater extent than any other large American city. This paper conducts a comprehensive assessment of the effectiveness of Chicago’s TIF program in creating economic opportunities and catalyzing real estate investments at the neighborhood scale. This paper uses a unique panel dataset at the block group level to analyze the impact of TIF designation and investments on employment change, business creation, and building permit activity. After controlling for potential selection bias in TIF assignment, this paper shows that TIF ultimately fails the ‘but-for’ test and shows no evidence of increasing tangible economic development benefits for local residents. Implications for policy are considered. Acknowledgements: The author would like to thank Rachel Weber and Daniel Hartley for sharing critical data sources and helpful comments, and three anonymous referees at Urban Studies. Thanks to Bill Rohe and Meenu Tewari for opportunities to present this research in the Department of City and Regional Planning. Thanks also to participants in the World Planning Schools Congress (July 2011) in Perth, Australia. Thanks to Jason Kajer and Patrick Nerz for providing valuable research assistance and to Ashley Tindall for editorial assistance.