Bill to Examine Tax Incentives OK—as Far as it Goes

Joel Fox
Editor and Co-Publisher of Fox and Hounds Daily

In principle, there is nothing wrong with Senator Hannah Beth Jackson’s idea (SB 468)  to examine tax incentive programs often referred to as tax expenditures. These are programs set up as incentives often offered to businesses to achieve desirable economic goals. Jackson says failed tax expenditures are costing the state needed revenue. I’m all for a fair accounting of tax incentive programs. But Jackson’s proposal should be coupled with a look at the failures of government policies as well that are costing taxpayers through mismanagement and inefficiencies.

The language used in discussing tax expenditures has always been troubling. Government officials feel they have first call on dollars that should go for government purposes. It is considered a “loss” if dollars stay with taxpayers instead of ending up in government coffers. In reality, the taxpayers created the wealth and it should not be considered a loss if taxpayers rightly retain the money.

But putting the linguistic objection aside, if programs are created to meet certain goals and they fail to do so, they should be examined and changed if they fail. Adequate time is necessary to reach certain goals and premature ending of programs is out of line, especially if the end game of the state is to find more revenue.

Which is certainly Jackson’s objective.

The first section of her bill doesn’t deal with the effectiveness of tax expenditures in reaching certain goals but instead starts by saying schools need money and according to the bill: While these expenditures have been put in place with the goal of achieving certain policy objectives, they have the effect of reducing revenue to the General Fund.

Instead of emphasizing the need for revenue, the objective of examining any tax incentive program should be: Is it working as it is supposed to? Is the incentive achieving goals set out for it? That is an appropriate purpose for examining the expenditures.

While she’s at it, Senator Jackson should add an examination of government programs which short change taxpayers. That would be the fair thing to do in the spirit of seeing if government sanctioned programs work to the taxpayers’ advantage. There are numerous examples to explore: high-speed rail; the DMV; endless wasteful computer programs in the most advanced high-tech state.

While the Senator wants to remove incentives that are failing, why not devise a plan for when government fails the taxpayers? If government fails no one seems to pay a penalty – except the taxpayers.

While there is a reasonable premise for examining the success of tax incentive programs, the plan is only half-baked if government tax efficiencies are ignored.

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