The PDIT database allows users to download the whole data set or some subset of selected data. Users can select and extract from the database any combination of incentives and/or taxes. They can select a particular state and/or industry, multiple states and industries, particular groups of industries, such as the average of all export-base industries, or the nation as a whole. Users may also select a particular starting year from the 26 available, and a particular range of the 20-year simulation time period of the new facility following the initial year. Or, of more relevance to most users, they can select an "average" for the incentive or tax during the 20-year simulation period (more on this below).
The resulting data are reported as a percentage of the value-added for that particular industry. Value-added refers to the value of the products of an industry above and beyond the value of the materials that go into making those products. For example, for the automobile manufacturing industry, the value-added is the value of vehicles minus the materials such as steel, plastic, and glass that go into making them. Alternatively, value-added can be viewed as the sum of the business's labor costs plus payments to capital, including profits and interest payments, as by definition revenue from a business's sales minus its costs of materials must go as payments to either labor or capital. In the research literature on business incentives, value-added is often used as a proxy for business costs. As a result, by presenting the data as a percentage of value-added, the database in effect allows users to examine the incentives received or tax paid as a percentage of the facility's local costs.
As mentioned, the data that might be most relevant for most users are the "averages" over the 20-year simulation period. This data is available for a particular incentive or tax, or all incentives or taxes. The averages are calculated in three different ways. First, the method emphasized in the report is to calculate the present value of taxes or incentives over the 20-year simulation period using a 12 percent real discount rate. This present value is then calculated as a percentage of the present value of the industry's value-added over that same 20-year period using a 12 percent discount rate. Empirical research suggests that such a high discount rate reflects the perspective of many corporate decision makers, who place a higher value on short-term factors than on long-term factors. Second, an alternative method is to calculate the present value of taxes or incentives over the 20-year simulation period using a 3 percent real discount rate as a percentage of the present value of value-added. A 3 percent real discount rate is agreed in the research literature to be closer to the discount rate that might be appropriately used by policymakers to compare current versus future benefits and costs, and such a discount rate is more long-term oriented than a 12 percent discount rate. Finally, a third method is to weight each of the 20 simulation years by an assumed age distribution of facilities across years of operations. That is, we look at incentives or taxes as a percentage of value-added for each year of operation of a business, from start-up on, but weight these percentages by what proportion of businesses are in each age category. This is even more long-term oriented than the two discount rate procedures. This third method is described in more detail in the report.
The database also allows the user to download averages for all export-base or non-export-base industries. The export-base average is of particular interest, given the importance of export-base industries to state economic development. These averages for a particular state, or for the nation, use national industry weights as of 2011 to calculate averages.
The PDIT database also allows the user to download national averages, whether for export-base industries overall, non-export-base industries overall, or for a given industry. These national averages are weighted averages that in all cases use each state's total private Gross State Product for 2014 as weights.
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