Summary: Pursuant to a congressional request, GAO studied the enterprise zone program in Maryland to identify issues for the possible development of a federal program, focusing on: (1) program cost offsets; (2) employment growth; (3) program effects on workers; (4) reductions in welfare dependence; and (5) the effectiveness of tax incentives and other local development strategies.
GAO found that: (1) both Maryland and proposed federal legislation sought to establish zones to promote private investment in economically distressed areas; (2) program-related increases in employment could lead to net increases in economic activity and program cost offsets; (3) the Department of the Treasury estimated that a federal program could cost $4.75 billion over the first 6 years of operation and assumed that the program would redistribute, but not increase, economic activity; (4) the employment growth experienced in the three Maryland zones investigated was not attributable to the program, making cost offsets or reductions in welfare dependence unlikely; (5) participating employers were more likely to consider market access and site characteristics than such program benefits as relaxed regulatory practices, financial inducements, and government assistance; and (6) participating employers were more likely to be influenced by financial incentives in making hiring and investment decisions.
