Can you have tax credit transparency without identifying who’s receiving the tax credits?
That’s the question facing House and Senate budget negotiators as they try to resolve differences between two tax credit transparency initiatives approved by the two branches.The House budget proposal, borrowing language first proposed by Gov. Deval Patrick, would require state agencies that issue tax credits to identify by name the businesses that receive them, as well as the number of jobs they generate and the salaries they pay.
The original Senate budget included a similar proposal, but it was amended during debate to keep the names of the tax credit recipients hidden from public view. The amendment, entitled “preserving the confidentiality of individual taxpayer information,” was filed by Sen. Karen Spilka of Framingham. It requires only the disclosure of the number of tax credit recipients, not their actual names.
Spilka, the chair of the Legislature’s Economic Development and Emerging Technologies Committee, did not return phone calls.
The total cost of the state’s economic development tax credits — the revenue either paid out or foregone by offering tax breaks to companies — is more than $1.5 billion. Yet the credits receive almost no public scrutiny. Unlike state spending, which is reviewed each year during the budget process, tax credits get enacted and are rarely ever looked at again. No one has studied how well they work or whether the economic activity they generate is worth the cost. CommonWealth magazine has written extensively on this subject here, here, and here.
Patrick, in his budget proposal, proposed greater public disclosure so analysts could research whether the state’s film, life science, medical device, historic rehabilitation, and other tax credits are paying off. The idea was picked up by budget officials in the House and Senate, but during debate on May 20 on the Senate floor the question of taxpayer confidentiality was raised.
According to State House News Service coverage of the debate, Spilka described her amendment as a minor change that would not hinder efforts to find out how many tax credits are being given out and whether jobs are being created. She said investors had told her they would be unlikely to invest in Massachusetts using state tax credits if their names were released to the public.
Sen. Mark Montigny of New Bedford initially objected to the amendment and called for a roll call, but then backed off after approaching the rostrum where Senate President Therese Murray typically presides. He told his fellow senators that he was troubled by the amendment. “What I cannot accept is that we are taking money out of taxpayers’ pockets and putting it on the balance sheets of corporations,” the State House News Service quoted him as saying.
Sen. Steven Panagiotakos of Lowell, the chairman of the Senate Ways and Means Committee, which called for tax credit recipients to be identified in its budget proposal, indicated on the Senate floor that he had had a change of heart. He said the state had come a long way in its efforts to make tax credit information more transparent, but it would be going too far to release the names of tax credit recipients. “I think this amendment takes a balanced approach,” he was quoted as saying.
Cyndi Roy, a spokeswoman for the governor’s office of administration and finance, said in an emailed statement that Patrick favors full disclosure. She said the governor’s original proposal, which was adopted by the House, “would improve transparency in government by shining a light on those individuals and businesses receiving tax benefits from the Commonwealth. The requirement that the identities of beneficiaries be disclosed is key to providing the transparency and accountability that residents are demanding of their governnment.”
