A state commission today unanimously agreed on a set of basic principles that will guide its members as they evaluate and scale back the $24 billion in tax breaks the state hands out every year.
The principles are very basic, but members nevertheless hailed the agreement as significant because it puts top state officials on record saying that tax breaks are just another form of government spending that should be evaluated regularly for effectiveness, limited in scope, publicly disclosed, and subject to clawbacks if recipients fail to deliver on promised benefits.
“It does sound like common sense,” acknowledged Jay Gonzalez, the governor’s secretary of administration and finance, who heads the commission. “But it’s something that the state has not been doing.”
Currently, tax breaks that find their way into law are rarely reviewed and almost never eliminated. The 11-member commission includes the state treasurer, auditor, top legislative leaders, economists, and business officials. The group is scheduled to release a report on the state’s so-called tax expenditures in April. Currently, the $24 billion in tax breaks the state hands out every year exceeds the $20 billion it collects in tax revenues.
In their discussion of the five principles that will guide them, commission members debated the implications of some of the language. For example, Sen. Stephen Brewer, the chairman of the Senate Ways and Means Committee, worried that a principle calling for tax breaks to be “as equitable as possible, including recognition of taxpayers’ capacity to pay taxes,” might be construed as an endorsement of a graduated income tax.
“That’s best left for the referendum process,” said Brewer, who nevertheless went along with the language after Gonzalez assured him that the group’s principle was not an endorsement of a graduated income tax.
Commission members deleted a section of one principle calling for a reduction in the number of tax breaks, but Gonzalez and others said the group will continue to push for paring back the state’s tax expenditure budget to include only those that are highly effective.
