For Immediate Release - April 07, 2011

Auditor Bump Finds Business Tax Code Lacks Accountability, Transparency

Presents lawmakers with findings from initial review of business credits, sales tax exemptions

BOSTON, MA (April 7, 2011) – Massachusetts State Auditor Suzanne M. Bump, today in testimony before the Joint Committee on Revenue, presented findings of an initial review of $2.2 billion in businesses tax credits, deferrals, deductions and sales tax exemptions that the Commonwealth grants to Massachusetts businesses.  Auditor Bump said the review makes clear that our tax code lacks accountability and transparency.

“Every year all government spending programs are subject to review and appropriation, and then they are subject to review by the Office of the State Auditor, “ said Auditor Bump. “Once a tax break gets passed, however, it goes into a black box and seldom, if ever, does anyone look back and determine whether it is working as intended or whether there is continued public benefit.”

Auditor Bump provided legislators with a document that identified 91 of the 203 programs in the tax expenditures budget that have significant business ramifications, collectively valued at $2.2 billion.

Among the findings in Auditor Bump’s review:

  • Only eight business tax expenditures of the 91 reviewed have a sunset clause, meaning once it is passed, there is a time set in the future to review its usefulness. The 83 business expenditures without any sunset clause are valued at $2.1 billion.
  • Only ten of the 91 reviewed tax expenditures have clawback provisions in which the state can attempt to recoup money for unmet obligations. The 81 expenditures without a clawback provision have a value of $2.1 billion.
  • Nineteen of the 91 tax expenditures require the recipient to report to some state entity on various aspects of the expenditure.
  • Nineteen of the 91 reviewed tax expenditures have public disclosure requirements.
  • Only 17 of the 91 business tax expenditures reviewed have any special, identifiable oversight procedures.

Auditor Bump said she supports the goals of several bills before the committee which establish a regular oversight process for tax incentives.

“Taxpayers deserve to have a tax code that is fair and accountable and accomplishes the goals to which it was intended,” said Auditor Bump.

The next phase of the Auditor’s review will include conducting audits of oversight measures from a select sample of tax breaks. Auditors will be looking for how eligibility for favorable tax treatment is verified and whether it accomplishes its goal of economic development.

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Special Report: Initial Review of Business Tax Expenditures pdf format of Initial Review of Business Tax Expenditures