Effectiveness of Tax Incentives for U.S. Businesses: 2020–2026 Evidence
Virginia Business Tax Incentives by Estimated State Revenue Return
The data center sales and use tax exemption ranks first among the 11 Virginia business tax credits and exemptions reviewed here, at an estimated $0.48 in Virginia state revenue per $1 of incentive cost.
This Virginia-only comparison combines figures from two JLARC reports and one official presentation: the 2024 Economic Development Incentives report, the 2025 Workforce and Industry Incentives report, and the 2022 Science and Technology Incentives presentation.
The figures are economic-model estimates rather than observed cash repayments. The comparison uses publications released by December 31, 2025, and was checked on July 14, 2026. The historical values are not projected to 2026.
A program is included when one of the selected JLARC publications reports a comparable Virginia state-revenue return for each $1 of tax credit spending or forgone sales tax revenue. Eleven programs meet that rule.
Data center sales and use tax exemption.
R&D sales tax exemption.
Calculated from the 11 published values.
Two JLARC reports and one official presentation.
What the Fiscal-Return Metric Means
The ranking compares estimated Virginia state revenue associated with economic activity attributed to an incentive against the incentive's cost. For a tax credit, cost generally means the credit awarded. For a sales tax exemption, it means estimated revenue forgone because qualifying purchases were not taxed.
Fiscal-return formula
Estimated fiscal return = estimated Virginia state revenue generated ÷ incentive costA result of $0.48 means the model associates 48 cents of state revenue with every $1 of incentive cost.
This is a gross state-revenue ratio, not a profit margin or complete benefit-cost calculation. A return below $1 means estimated state revenue did not fully recover the incentive cost during the period studied.
Reading the leading value: a $0.48 return leaves a simple state-revenue gap of $0.52 per $1 of cost. This comparison does not include every possible local tax effect, innovation benefit, workforce outcome or regional-development objective.
Highest Estimated Fiscal Returns
Four programs occupy the first three rank positions because the two programs reported at $0.10 are tied. Equal published values receive equal ranks.
Highest returns among the 11 included programs
| Rank | Incentive | Return | Period | Source |
|---|---|---|---|---|
| 1 | Data center sales and use tax exemption | $0.48 | FY2022–FY2023 | JLARC 2024 |
| 2 | Taxi parts and radios exemption | $0.11 | FY2014–FY2023 | JLARC 2025 |
| 3 | Contractor temporary storage exemption | $0.10 | FY2014–FY2023 | JLARC 2025 |
| 3 | Uniform rental and laundry businesses exemption | $0.10 | FY2014–FY2023 | JLARC 2025 |
Estimated Return for All 11 Programs
The data center exemption is the only program above $0.11 per $1. Seven programs report $0.05 or less, showing how strongly the results are concentrated near the lower end.
Bar lengths are scaled to the $0.48 leader. Equal values have equal bars and equal ranks.
Methodology and Limits
Metric
Estimated Virginia state revenue generated per $1 of tax credit spending or forgone sales tax revenue.
Ranking rule
Higher values rank higher. Programs with the same published value share a rank.
Publication period
The three JLARC publications used for the figures were released in 2022, 2024 and 2025.
Coverage
Eleven Virginia business tax credits and exemptions with comparable program-level fiscal-return figures.
JLARC contracts with the University of Virginia's Weldon Cooper Center for economic-impact analysis. The models estimate direct, indirect and induced activity and the state revenue associated with activity attributed to an incentive. They also account for the fact that some business activity would have occurred without public support.
JLARC's broader economic analysis also considers the opportunity cost of raising revenue to fund incentives. The ranking uses the reported state-revenue ratio and should not be confused with a complete estimate of net economic impact.
Why the results differ
- Evaluation periods range from FY2013–FY2020 to FY2022–FY2023.
- Program use and the quality of administrative records vary.
- Attribution assumptions depend on program design and available evidence.
- Industry wages, capital spending, suppliers and economic multipliers differ.
- Some exemptions also pursue tax-parity or industry-policy goals.
- Small differences such as $0.04 versus $0.05 may not indicate materially different performance.
R&D limitations
The R&D figures measure short-run fiscal effects through periods ending in 2020. They do not capture every long-term knowledge spillover, innovation benefit or productivity gain.
A later JLARC publication
JLARC published Film, Media, and Tourism Incentives in June 2026. It was released after the three publications used for this ranking, so its figures are not mixed into the table.
Full Ranking of 11 Virginia Tax Incentives
Search by program name, filter by type, change the order or show 10 or all matching programs.
Estimated Virginia state revenue generated per $1 of incentive cost
| Rank | Incentive | Return | Period | Notes and source |
|---|---|---|---|---|
| 1 | Data center sales and use tax exemption | $0.48 | FY2022–FY2023 | JLARC 2024 Modeled estimate |
| 2 | Taxi parts and radios exemption | $0.11 | FY2014–FY2023 | JLARC 2025 Modeled estimate |
| 3 | Contractor temporary storage exemption | $0.10 | FY2014–FY2023 | JLARC 2025 Modeled estimate |
| 3 | Uniform rental and laundry businesses exemption | $0.10 | FY2014–FY2023 | JLARC 2025 Modeled estimate |
| 5 | Out-of-state nuclear facility repair exemption | $0.05 | FY2014–FY2023 | JLARC 2025 Modeled estimate |
| 5 | Printed materials for out-of-state distribution exemption | $0.05 | FY2014–FY2023 | JLARC 2025 Modeled estimate |
| 5 | R&D expenses tax credit | $0.05 | FY2013–FY2020 | JLARC 2022 Modeled estimate |
| 8 | High-speed electrostatic duplicators exemption | $0.04 | FY2014–FY2023 | JLARC 2025 Modeled estimate |
| 8 | Major R&D tax credit | $0.04 | FY2018–FY2020 | JLARC 2022 Modeled estimate |
| 8 | Worker Training Tax Credit | $0.04 | FY2021–FY2023 | JLARC 2025 Modeled estimate Expired July 1, 2025 |
| 11 | R&D sales tax exemption | $0.01 | FY2018–FY2020 | JLARC 2022 Modeled estimate |
| No programs match the selected search and program type. | ||||
Ranks use the published values. The Worker Training Tax Credit remains in the historical comparison but is marked as expired.
What the Results Show
One clear leader
The $0.48 data center estimate is more than four times the $0.11 result for the next program.
Low-return concentration
Seven of the 11 programs report $0.05 or less in estimated state revenue per $1 of cost.
Incomplete cost recovery
All 11 results are below full state-revenue cost recovery during their evaluation periods.
Program context matters
Industry structure, wages, capital spending, program use and available records can affect the reported return.
How to Interpret the Ranking
For policymakers
A low state-revenue return increases the importance of documenting other goals, such as additional investment, workforce development, innovation, regional growth or neutral tax treatment of business inputs.
For businesses
A program's public fiscal return does not determine whether it benefits an individual company. Eligibility, tax liability, caps, carryovers, application costs and compliance requirements remain separate questions.
A program can also be compared with narrower credits, performance-based grants, workforce services, infrastructure investment or no intervention. The state-revenue ratio is one part of that assessment, not a complete judgment on the program.
Frequently Asked Questions
Which Virginia tax incentive has the highest estimated fiscal return?
The data center sales and use tax exemption ranks first at $0.48 in estimated Virginia state revenue per $1 of incentive cost for FY2022–FY2023.
Are these observed tax collections?
No. They are estimates produced through JLARC's economic-impact analysis rather than directly traced tax payments.
Does a return below $1 mean a program had no value?
No. It means estimated state revenue did not fully recover the incentive cost during the period studied. Other goals require separate evidence.
Is this a nationwide ranking?
No. It compares 11 Virginia programs evaluated in three JLARC publications and should not be applied automatically to federal incentives or other states.
Are these 2026 values?
No. The page was checked in 2026, but the figures retain evaluation periods ending in 2020 or 2023 and were not projected to 2026.
Why do programs with the same value share a rank?
The reported values are tied at the published precision. Different ranks would imply a difference not supported by the figures.
Is the Worker Training Tax Credit still active?
The 2025 JLARC publication states that the credit expired on July 1, 2025. Its historical result remains in the comparison.
Why should the R&D results be interpreted cautiously?
The estimates cover short-run fiscal effects and may not capture all long-term innovation and knowledge spillovers.
Official Sources
JLARC Economic Development Incentives 2024
Source for the data center exemption's $0.48 return and FY2022–FY2023 evaluation period.
JLARC Workforce and Industry Incentives 2025
Source for the Worker Training Tax Credit and six industry exemptions.
JLARC Science and Technology Incentives 2022
Source for the two R&D tax credits and the R&D sales tax exemption.
JLARC Economic Development Evaluation Program
Overview of Virginia's continuing reviews of grants, tax credits, exemptions and other incentives.
JLARC Film, Media, and Tourism Incentives 2026
A newer JLARC evaluation published after the three publications used for this ranking. Its figures are not included in the table.
JLARC Reports by Year
Official archive for publication dates and later JLARC releases.
