Tax Expenditure Commission Approves Final Recommendations
Panel Advises Paring Down Existing, Limiting New Tax Expenditures;
BOSTON – Monday, April 23, 2012 - The Tax Expenditure Commission voted unanimously today to approve its final report to the Legislature regarding the review and management of tax breaks known as tax expenditures. The Commission’s report includes recommendations to pare down existing tax expenditures through performance management, sunset and claw back provisions and proposed requirements for approving new expenditures, including overall dollar caps on new grant-like expenditures.
“We must do everything possible to ensure that every taxpayer dollar is being invested as effectively as possible – and that includes taxpayer dollars we choose to invest in the form of tax breaks,” said Secretary of Administration and Finance Jay Gonzalez. “The report of the Tax Expenditure Commission provides policymakers with a thoughtful and comprehensive roadmap for managing the Commonwealth’s tax expenditure budget.”
In its Fiscal Year 2012 budget, the Legislature established and Governor Patrick approved a Tax Expenditure Commission to study the various exemptions, deductions and credits in the Massachusetts tax code, and to recommend methods for measuring and reviewing their effectiveness. The Commission, which met nine times since October, 2011, was chaired by the Secretary of Administration and Finance Jay Gonzalez and included Constitutional Officers, legislators and economists.
Tax expenditures include credits, deductions and exemptions from the basic provisions of the state’s tax code. Those tax breaks are expected to result in the Commonwealth forgoing $26 billion in tax revenue it would otherwise collect in Fiscal Year 2013, which is more than the total amount of tax revenue expected to be collected. The Commission approved eight formal recommendations, including:
- Reducing number and cost of existing tax expenditures, based on identified criteria;
- Periodic review of tax expenditures, including automatic sunset of discretionary “grant-like” tax expenditures every five years, based on data driven analysis and reports regarding effectiveness;
- Establishing clawbacks and other enforcement measures for grant-like tax expenditures to ensure recipients meet commitments;
- Requirements for approving new tax expenditures, including specified purposes and findings and overall dollar caps on new grant-like tax expenditures; and
- That the Legislature and Governor should work collaboratively to identify and publish for each tax expenditure a clearly articulated public policy purpose and desired outcome.
The Commission’s final report will be filed with the Legislature by April 30, 2012.