New Bill Would Enhance Tax Break Accountability
A new bipartisan bill was introduced this morning that would apply renewal dates to more than 300 special tax breaks that are on books in our state. As our analysis from previous years has shown, this commonsense reform is long overdue. House Bill 2762 would require policymakers to proactively review the hundreds of narrow credits, exemptions, deductions, and other special state tax breaks over the next decade. In doing so, the measure would significantly improve transparency and accountability over our entire state budget process.
Both conservative and progressive tax experts agree that special tax breaks are forms of state spending, similar to public expenditures on health care, education, and other public priorities. As such, narrow tax breaks are often referred to as “tax expenditures” (see box below; click box to expand).
Unlike direct state spending on education and other services, policymakers do not regularly review tax breaks to ensure they achieve public goals in an efficient and cost-effective way. Even though they amount to billions of dollars in hidden spending each year, tax breaks can remain on the books for years or decades without ever being reviewed.
House Bill 2762, introduced by Representative Reuven Carlyle, would help close the accountability gap between direct state spending on public services and indirect spending on special tax breaks. Over the next 10 years, over 300 special tax breaks would be set to expire under the measure.
Setting expiration dates for tax breaks makes sense. When deciding whether to renew them, policymakers would be required to balance their costs and benefits against those of other public priorities. HB 2762 would create a more holistic budget process that accounts for all forms of state spending – including spending on narrow tax breaks for various businesses and groups.
For more information check out our policy brief, “Every Dollar Counts: Why It’s Time for Tax Expenditure Reform,” and the schmudget post “Opponents of Reform Rely on Illogical Justification for Tax Breaks.”
