Commission votes to allow some tax breaks to expire
BOSTON — A commission created by the Legislature is planning to call for the end of some of the scores of tax breaks and credits that add up to a total of $26 billion in waived revenue collections each year.
The Tax Expenditure Commission, made up of legislators and policymakers, voted to adopt Secretary of Administration and Finance Jay Gonzalez’s recommendations to categorize existing tax breaks and allow some to expire if not reapproved by the Legislature after five years.
The commission’s final recommendations will be issued in a report on the state’s tax-expenditure policies later in the month.
“Up to this point, the state has never ever, ever done a comprehensive review of not only articulating what the purpose of each of these different tax breaks is, but at looking at whether or not they are being effective,” Gonzalez said after the commission meeting.
The commission voted unanimously to recommend that certain tax credits “sunset” after five years if they are not reauthorized by the Legislature. Among them, according to Gonzalez, are six tax breaks dealing with low-income housing credits, life-science research credits and credits that would be affected.
Gonzalez said the moves would give the governor and the Legislature an opportunity to reduce tax breaks when appropriate.
“We forgo about $26 billion in revenue each year because of all the different tax breaks in the tax code,” Gonzalez said.
He added that the state brings in $4 million less in overall tax revenue than it grants in total tax breaks — referred to in the language of Beacon Hill as “tax expenditures” — including personal income-tax exemptions.
Michael Widmer, president of the Massachusetts Taxpayers Foundation, supported the specific recommendations adopted by the panel, but called Gonzalez’s claim about total tax revenue versus expenditures “misleading.”
“Ten billion of that is the fact that we don’t tax services,” he said. “Because we don’t tax it, that’s an expenditure? That doesn’t make sense to me.”
Widmer said he worries that future sunset measures could develop an anti-business mindset that chases businesses and jobs out of the state.
“The overall concern about all of this, in my mind, is that this not be used as a way to undercut or do away with some important initiatives over the years to improve the state’s competitive landscape,” he said. “If this is done surgically, which I think these are and it stops there, then that’s reasonable.”
Administration officials said the recommendations would only help the state’s business climate.
“I would argue that this makes Massachusetts more business-friendly by making sure the money we’re spending is well spent,” said Daniel Sullivan, counsel to the Administration and Finance Office.
The need to review the effectiveness of the tax breaks is not a response to any particular tax-credit abuses, Sullivan said.
Rep. Steven Levy, a Marlboro Republican and member of the commission, said that while some members may have been focused on raising revenues, he simply wants the Legislature to make sure that tax credits are creating jobs and keeping businesses in the state.
“I think every expenditure ought to be evaluated,” Levy said. “They’ve been on the books for decades, and nobody’s gone back to make sure they are serving their intended purpose.”
The commission also recommended that state officials work with counterparts in other states to figure out the best way to review tax expenditures.
North Central Massachusetts Chamber of Commerce President David McKeehan said that while he was not familiar with the recommendations, he knew of states that had gone “overboard” in issuing tax credits.
He said tax breaks are vital to the Bay State’s economic interest and that getting a tax credit reauthorized by the Legislature should not be “unduly complicated” for industries.
“It’s an extremely valuable program for making certain types of projects feasible in terms of attracting companies to various communities and keeping them here,” he said.