Requiring the DOR to Conduct Periodic Studies on the Results of Tax Incentives

H.3049 directs the Department of Revenue (DOR) to create a tax expenditure report every four years to determine the effectiveness and efficiency of economic development tax incentives issued by the General Assembly. The DOR is to consult Revenue and Fiscal Affairs Office and the Office of Research and Statistics in creating the report.

The report must include, among other things:

  • A baseline assessment of the tax incentive, including the number of jobs associated with the companies receiving it, and the amount of tax revenue the companies generate
  • The goals and intent of the tax incentive
  • The value of the tax incentive
  • An analysis of how the state’s revenue stream is affected by the incentive, and a 5-year prediction of how the revenue stream will be affected if the incentive is continued
  • An estimate of the economic impact of the tax incentive, including
    • A cost/benefit analysis of how much revenue was lost and gained by the state as a result of the incentive
    • The number of jobs created by the incentive
  • How much the incentive cost to administer
  • How much of the revenue generated stayed within the state
  • Whether state law should be changed to allow for better data collection for the purposes of the analysis
  • Whether the goals of the incentive should be clarified by the General Assembly
  • Whether the incentive should be continued, amended, or repealed, and why
  • How the report was created

The completed report must be delivered to the House Ways and Means Committee Chairman and the Senate Finance Committee Chairman.

The General Assembly has long been in the habit of blindly investing taxpayer dollars with zero follow-up or analysis of return on investment. While this is a long over-due step in the right direction, a truly effective report would be created by a third party and would compare the assumptions under which the incentive was issued with the actual results. That comparison should form the basis of the report and the recommendation of whether or not the incentive should be continued.

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