41 states and DC now publishing tax-expenditure reports

Forty-one states and the District of Columbia are now publishing a record of their foregone tax revenues due to various tax breaks and incentives, according to a new report from the Center on Budget and Policy Priorities think tank.

Oregon, Minnesota and Connecticut publish relatively comprehensive and informative reports on “tax expenditures” that could serve as a model for others, states the center's report, which was released April 9. Tax expenditures refer to revenues that would have been collected if tax incentives did not exist; on the balance sheet, those lost revenues have the same impact as expenditures.

Nine states — Alabama, Alaska, Georgia, Indiana, Nevada, New Jersey, New Mexico, South Dakota and Wyoming — published no report of foregone tax revenues. That harms transparency because taxpayers have no record of the lost revenues. Such records are necessary for making good public-policy decisions about whether to expand or decrease the tax incentives, the center states.

Other state tax-expenditure reports omit essential information, do not file the reports annually or fail to make the information accessible to the public on the Internet.

“Some state tax-expenditure reports are much better than others, but every state could improve its practices in this area,” the center states. “Without information on a particular tax expenditure’s costs and benefits, lawmakers cannot make an informed decision on whether its continuation is in the state’s interest. More broadly, if policymakers, the media and the general public lack information about tax expenditures, they cannot fully participate in decisions about how to allocate state resources."

The tax reports online could be more useful if they published them in a machine-readable format such as Microsoft Excel rather than as an Adobe Acrobat file, Adam Hughes, director of federal fiscal policy for OMB Watch, wrote on his blog on April 14.

“Of the 38 states that publish reports online, every single one published the information as a Adobe Acrobat PDF file even though many of the reports contained detailed tables, charts and other data presentations,” Hughes wrote. “This format prevents people from easily using the underlying data for analysis and comparisons to other data sets and restricts the overall usefulness of disclosing the data in the first place.”