Tax breaks, or expenditures, are the entitlement programs that nobody seems to complain about. Though maybe we should, given they cost Rhode Island more than $1.7 billion a year in 2009. That same year the state took in just over $3 billion. In other words, we gave away more than half as much as we actually collected. The idea is that we’re getting something for these giveaways. But nobody really knows how this $1.7 billion investment is doing for the state because nobody is paying attention to the money we aren’t getting.
A bill being heard by the House Finance Committee today would remedy that wrong. It’s sponsored by Rep. Teresa Tanzi of South Kingstown and reps. Walsh, O’Grady, Valencia and Ferri have each signed on. They’ve got a strong ally in the Economic Progress Institute, too, which released a report on the issue that will do a far better job than me at explaining why this is a no-brainer for the Ocean State.
Here’s the condensed version from their release:
To ensure Rhode Island uses its available resources in the most effective way possible, it’s time to subject tax breaks, that cost the State over $1.7 billion a year, to the same scrutiny given to money spent through the state budget.
Like other states, Rhode Island increasingly writes into law provisions that allow people or businesses to reduce their taxes if they meet certain criteria. But Rhode Island is among the states that pay the least attention to whether tax breaks for businesses achieve their stated goals, according to a recent study by The Pew Center on States. The reputable research organization listed Rhode Island among 26 states that are “trailing behind”—Pew’s lowest ranking—because the State met none of the criteria for the scope or quality of evaluation key to determining whether tax breaks are worthwhile policy.
Pew found that while no state “regularly and rigorously tests” whether tax breaks for businesses are benefiting a state, 13 states are “leading the way” in generating answers about the effectiveness of their state’s tax breaks.2 Rhode Island should follow the lead of the exemplary states, including neighboring Connecticut, that are taking important steps to more carefully examine some or all of their tax breaks, particularly those enacted with the goal of creating jobs.