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Event Recap
NEW YORK, OTHER STATES SHORTCHANGED BY $1 TRILLION STATE TAX BREAKS, NEW ECONOMIC ANALYSIS SHOWS
Economic Experts Examine if Massive Tax Breaks Are Beneficial or Leaving States Short on Critically Needed Revenue
The discussion centered on a new issue paper from the Volcker Alliance, Benefit or Burden: Evaluating $1 Trillion in State Tax Expenditures, which examines the present and predicted effects of such massive tax breaks, which often lack rigorous oversight, and offers scorecards comparing the reporting methods of six states with widely differing policies: Alabama, Minnesota, New Jersey, New York, Utah, and Washington.
According to the paper, tax expenditures decrease state revenues by as much as $1 trillion annually, nearly three times the total state spending on education nationally in 2021. The paper offers recommendations for states wishing to improve their evaluation and disclosure of tax expenditures.
Matt Fabian, one of the paper’s authors, stressed that states need to track their tax expenditures more closely and evaluate if they are truly necessary or beneficial in the first place: “We went into this project expecting a mess,” he said. “It was much worse than that. We're not even advocating for true, actual public disclosure of the information. We just want states to get their arms around what it is they're doing.”
When asked what makes sense in optimizing tax breaks in terms of distressed communities, Tim Bartik, senior economist at W.E. Upjohn Institute for Employment Research, said that the best course of action would be to “target the distressed communities and limit the tax breaks in non-distressed communities, except in special cases. I would also make sure that before you massively fund tax breaks, that you fund infrastructure and job training which evidence suggests is more cost effective in creating jobs than some of these tax breaks. States need to fund more programs where community colleges will train workers for companies so they can make sure they have the labor and the real estate they need.”
Arlene Martinez, deputy executive director at Good Jobs First offered a different take: “I was a journalist for many years, reporting a lot on local spending and budgets, and I could see what would happen when communities were strapped for cash. The programs that often got cut were often programs that targeted low-income folks or vulnerable people, because they tended to have less of a voice in the process.”
Jonathan Ball, Utah legislative fiscal analyst, presented the state’s four tools for evaluating tax incentives: a cost estimate on every piece of legislation, taking dynamic fiscal notes, a regular scheduled set of reviews for the incentives, and risk mitigation through budget stress testing. He said that while Utah didn't score very well overall in terms of following best practices with monitoring and reporting on taxes, he was pleased with their performance compared to other states.
