Oregon’s flawed tax-incentive studies offer a cautionary tale for London’s economic development

A recent investigation by City Observatory has revealed that taxpayer-funded studies by Oregon’s economic development agency, Business Oregon, systematically misrepresented academic research to justify tax incentives and a “business climate” obsession. The findings, published on 29 July 2026, are a stark reminder that economic development strategies can be distorted by bought-and-paid-for research. For London, a city that relies heavily on its own suite of tax breaks, business-rate reliefs, and inward-investment incentives, the Oregon case offers a clear warning: without rigorous evaluation, public money can be wasted on subsidies that do little to generate genuine economic growth.

The Oregon studies: what went wrong

Business Oregon spent more than $150,000 on two studies that were presented as authoritative evidence that tax breaks attract investment. The first, a Property Tax Incentives Impact Study prepared by the consulting firm Applied Economics in 2022, was paid $80,600. The report claims that property tax incentives led to significant investment, but City Observatory notes that the study’s methodology is fundamentally flawed.

According to the City Observatory analysis, the Applied Economics report explicitly ignored the key question of causality: whether the tax incentive actually caused businesses to invest in Oregon. The authors acknowledge near the end of their report that the best available literature (including the work of Upjohn Institute economist Tim Bartik) suggests that up to 75 percent of jobs created by incentive recipients would have been created anyway. They also concede that capital and operating costs dwarf the value of the incentives, and that they made no effort to determine whether investments would have happened without the tax break. The report states: “Relative to other options that businesses may have, the ability of any incentive to tip the scales at the margin in the context of other factors remains indeterminable.”

The contract between Business Oregon and Applied Economics, obtained through a public records request, instructed the consultant not to investigate whether the incentives had any effect on firms’ decisions. “The terms of their contract … instructed them not to look at the question of whether the incentives had any effect on the recipient firm’s decision to invest in Oregon,” the investigation reports.

Despite this, state officials have cited the study as proof that the tax breaks work, as reported by The Oregonian in February 2026. City Observatory describes this as “shoot everything that flies, claim everything that falls.”

Why it matters for London

London’s economic development strategy is built on a similar tool kit: business rate relief, enterprise zones, tax increment financing, and various incentives offered by the Greater London Authority (GLA), London & Partners, and borough councils. The GLA’s Economic Development Strategy, updated in 2021, emphasises “growing London’s economy” through targeted support for key sectors. Yet the question of whether these incentives genuinely cause additional investment, or simply reward firms that would have invested anyway, is rarely subjected to the same level of independent scrutiny.

The Oregon case shows that even well-funded studies can be designed to produce predetermined conclusions. If London’s own evaluations are not robust—if they ignore counterfactual analysis, rely on self-reported data from recipients, or fail to isolate the effect of the incentive—then the same waste could occur here. The City of London Corporation, for example, offers business rate reliefs for certain sectors, and the GLA has used a range of incentives to attract tech firms to the Old Oak Common regeneration area. Without transparent, independent evaluation, the public has no way of knowing whether these policies are cost-effective.

Key lessons for London policymakers

First, any study claiming to measure the economic impact of tax incentives must address causality. Simply counting jobs created by firms that received a subsidy is not enough; the study must attempt to estimate what would have happened without the subsidy. London’s own evaluation frameworks, such as the GLA’s Business Rates Retention pilots, should include a counterfactual analysis.

Second, policymakers should be wary of studies that cite academic research selectively. Business Oregon’s reports cited Tim Bartik’s work on incentives but omitted his core finding that most incentives are wasted. London’s economic development bodies should require that all commissioned research presents a balanced view of the literature, including any dissenting evidence.

Third, transparency is essential. The Oregon contract that prevented the consultant from examining causality was a red flag. London’s procurement processes should mandate that evaluations include a requirement to test the null hypothesis: that the incentive had no effect.

Fourth, avoid a race to the bottom. City Observatory notes that true prosperity comes from “cultivating distinct regional strengths and talent, not engaging in a race-to-the-bottom subsidy war.” London’s competitive advantage lies in its world-class talent pool, infrastructure, and cultural amenities—not in poorly designed tax breaks that can be easily matched by other cities.

What remains unclear

It is not known whether any of London’s current economic development studies suffer from the same methodological flaws as the Oregon reports. The GLA’s existing evaluations of its business rate reliefs and enterprise zones are not all publicly available in sufficient detail to assess their counterfactual reasoning. The City of London Corporation’s recent “Economic Impact of Business Rate Reliefs” report (2024) is a step forward, but it does not explicitly control for the “would have happened anyway” problem.

Further, the Oregon investigation highlights the role of contract terms in shaping research outcomes. It is unclear whether any London contracts impose similar restrictions on consultants. A public audit of all current economic development evaluation contracts would be a valuable next step.

Key facts: Oregon vs London

The Oregon case should serve as a prompt for London’s policymakers to review their own evidence base. The GLA’s Economy Committee, which scrutinises the Mayor’s economic policies, ought to request a full audit of all incentive-based programmes and their evaluations. Without such scrutiny, London risks repeating the same mistakes on a much larger scale.

Source: City Observatory. “Business Oregon studies lied about tax incentives and business climate.” 29 July 2026. https://cityobservatory.org/business-oregon-studies-lied-about-tax-incentives-and-business-climate/