Automatic Tax Breaks for MA Businesses: Time for Review?
December 4, 2009
BOSTON - Massachusetts is one of many states to use tax-related perks - tax credits, deductions and exemptions - to attract and retain businesses. But whether these incentives are effective ways to generate jobs or long-term economic growth are some of the questions raised in a new report by the Massachusetts Budget and Policy Center.
Randy Albelda, economics professor at the University of Massachusetts, Boston, says the true economic impact of such tax breaks has received very little scrutiny. She points out that, by giving any type of tax breaks – to corporations or individuals – the state loses out on much-needed revenue.
"Some of these tax exemptions have been on the books for a long time, and the question is, are they doing what they're supposed to be doing? And shouldn't we be asking that question, in the same way that we ask questions about line-items in the budget?"
For example, the report says the state currently spends $620 million more on economic development than it does on higher education. Albelda questions whether that is the most effective use of the money, long-term. In her view, education creates a strong and competitive workforce, which is important for the state's future.
"Is this the best way to spend our money, as opposed to thinking about other kinds of investments? And the one that this report points out, is investments in higher education."
The report is online at http://massbudget.org/doc/710. It says once tax breaks have been created, no further action is required by the legislature to keep them in effect. By contrast, when the governor or legislature decide to expand or cut programs, approval is needed on a yearly basis. Albelda would like to see more oversight from state agencies, as well as greater transparency, on the topic of tax incentives.