Massachusetts releases details on tax credit recipients
The state for the first time has released details on who benefited from eight major tax credits worth $171.2 million last year.
State agencies previously kept recipients of some of these tax breaks confidential, but now must report them annually under a new requirement lawmakers adopted in 2010.
The report shows Massachusetts awarded or issued about $51 million in tax credits to people and companies for fixing up historic sites, $47 million for redeveloping polluted land and $39 million for filming movies, shows or commercials.
Another $21 million went to life science companies expected to create jobs.
Other beneficiaries ranged from low-income housing developers to dairy farmers to people who conserved land.
Government observers praised the state for making the new details public, but said it is only a first step toward a better accounting of the state’s many tax incentives.
“We want to move from transparency, which is important, to accountability,” said Deirdre Cummings, legislative director for the Massachusetts Public Interest Research Group, or MASSPIRG.
This year, Massachusetts offers more than $24 billion in tax exemptions, deductions and credits, known collectively as the state’s tax expenditure budget.
The credits detailed in the new report differ from others in that recipients in some cases can sell them or trade them back to the state for cash.
Jay Gonzalez, Gov. Deval Patrick’s secretary of administration and finance, said the governor originally proposed the new requirement to detail recipients of such credits. Gonzalez compared them to grants.
“Where we’re making certain investments through tax expenditures, tax credits like this, the public really deserves to know who benefits,” he said.
Gonzalez also recently headed a state commission that this spring made a series of recommendations meant to improve oversight of the state’s tax breaks.
It recommended credits like the ones detailed in the new report expire automatically in five years unless the Legislature acts to extend them. The commission also called for regular reviews of all state tax breaks to determine if they are effective.
Now, once a tax break is adopted in hopes of spurring job creation, redevelopment or other goals, it is rarely revisited, Gonzalez said.
“The way we spend taxpayer money in the form of tax breaks has not been reviewed in the same way as we do with direct spending of taxpayer money,” he said.
The commission also recommended setting up more so-called clawback measures to recoup tax revenue from recipients who fail to meet their commitments.
Gonzalez’s office is now going through all the state’s tax breaks and outline a specific purpose for each one, a job expected to involve public input and take a few months to finish. The Legislature would ultimately have to agree to the new goals.
“That’s something that has never been done before in the state and that I think is very rare across the country,” he said.
Ultimately, the commission recommended paring down and simplifying the state’s gamut of tax breaks. Gonzalez said the state forgoes more money through exemptions, credits and deductions than it collects in tax revenue.
“It suggests that the exception has become the rule,” he said.
The commission did not specify whether the state should ultimately look to bring in more money by simplifying the tax system or if the effort should be revenue neutral.
Cummings said she hopes the Legislature will adopt the commission’s recommendations for further review and oversight of tax breaks.
“The proof will be in the pudding,” she said. “We’ll have to see if they adopt those reforms.”
Steve Poftak, research director for the Pioneer Institute, said it’s a good idea to review tax breaks and which are effective – particularly ones narrowly designed to benefit specific industries.
He also said he supported the release of new details on certain tax credits.
Simplifying the tax code also makes sense, he said, but should ultimately either hold businesses harmless or lower their costs.
“I think we should be careful about piling too much into the ‘tax credit’ bathtub and throwing the baby out with the bathwater,” he said.
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