Tax breaks add up to big money
“Too complicated, too big.”
Those were the words the Tax Expenditure Commission used to describe the tangle of tax breaks that amount to over $26 billion, or more in foregone tax revenue than the state takes in each year, according to the State House News Service. The commission was convened to study the financial impact of the credits and exemptions, and is expected to release a final report next month.
The State House News also reported that the commission would recommend a reduction in the number of tax breaks the state offers, but would likely decline to specify which credits should go, citing the complexity of the current system. The commission may recommend that lawmakers consider them one by one.
The recommendation would set the stage for a series of battles with those industries that benefit from the credits and exemptions. In 2010, when lawmakers were considering whether to alter the state’s film tax credit, a hearing on the matter played out in a predictably dramatic fashion, complete with industry activists dressed in costume. Similar revision efforts were blocked by the state’s aviation industry.
Tax breaks were traditionally a good way for bipartisan “spending” on projects and issues important to state leaders: Republicans could get behind a reduction in taxes, while Democrats could steer cash towards industries without a subsidy. They became controversial, however, when large tax breaks for companies like Evergreen Solar failed to produce promised benefits to the state.
Interestingly, the most controversial tax credits make up a small fraction of the so-called tax expenditure budget. The majority of credits represent long-established tax exemptions, such as sales tax exemptions on food, clothing, and services.
State House News reports that previous efforts at simplifying the tax code have failed, but with Gov. Deval Patrick lately clamoring to extract new revenue from an unwilling Legislature, closing tax breaks could be an issue that gains steam.
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