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Monday, April 24, 2023
ESG And The Demand For State Tax Incentives
Mark J. Cowan (Boise State; Google Scholar) & Joshua Cutler (Boise State), ESG and the Demand for State Tax Incentives, 26 Fla. Tax Rev. __ (2023):
This text argues {that a} enterprise which embeds environmental, social, and governance (ESG) issues in its technique ought to contemplate whether or not in search of or accepting focused state and native financial improvement incentives (which we discuss with as “state tax incentives”) is in step with that technique. The result of that consideration will differ by locality, incentive bundle, and technique. However given the demonstrated unfavorable influence of state tax incentives on authorities funds and the neighborhood, most ESG-minded firms ought to both forgo them or cooperate with the state in crafting incentives that profit each the corporate and the neighborhood.
A well-crafted ESG reporting customary on this matter will help information firms in direction of such win-win incentives and assist them credibly talk their strategy to buyers and different stakeholders. This text proposes that firms, buyers, and governments ought to foyer ESG standard-setters to create an efficient reporting customary, and we provide some suggestions for its traits. We consider that is the primary article to look at state tax incentives within the context of ESG and the primary to recommend that the demand for state tax incentives may be diminished as extra firms (and their buyers) understand that taking incentives is inconsistent with their ESG methods.
All prior makes an attempt to curtail state tax incentives have focused the availability of state tax incentives, by in search of to encourage or drive states to restrict their use. These makes an attempt have been unsuccessful, partly, as a result of they relied on persuading political actors to cease taking actions that they consider are in their very own self-interest. In distinction, a requirement aspect, company- and investor-driven strategy could also be extra profitable, as a result of making use of an ESG framework requires firms to behave in their very own curiosity, whereas higher bearing in mind long-term prices and advantages. This text explains the issues which have resulted from state and native tax incentives and the varied failed efforts to curtail them; critiques the rising idea of ESG; applies the literature on tax avoidance and company social duty to state tax incentives; supplies a primary define for a state tax incentive ESG reporting customary; highlights the strategic advantages that can accrue to an organization that takes a extra deliberate strategy to deciding whether or not to hunt and settle for state tax incentives; and identifies points on the intersection of ESG and state tax incentives which are ripe for future analysis.
https://taxprof.typepad.com/taxprof_blog/2023/04/esg-and-the-demand-for-state-tax-incentives.html
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