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Frederic Sautet and John Shoaf analyze the effectiveness of Memphis, Tennessee's Payment-in-Lieu-of-Tax (PILOT) program. With a heightened focus on job creation, cities are relying on targeted tax incentives to attract businesses. This study considers the characteristics of property tax incentives and examines their effect on growth. Because of the city’s high unemployment, Memphis’s PILOT program allows us to evaluate various tax incentive designs. The PILOT reduces the property taxes of select businesses in order to create new jobs and investment. As our analysis causes us to question the effectiveness of the PILOT, after discussing its specifics, analyzing available data, and surveying relevant literature, we suggest alternative policies for improving Memphis’s growth prospects.
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