State spending is on track to top $30 billion this year, but an often overlooked area of “spending” is the amount the state is granting to individuals and businesses in the form of tax credits, exemptions and deductions.
Those tax breaks totaled $24.2 billion this year and while the state is not writing a check for them, it can be argued every dollar given in tax credits and deductions is another dollar other taxpayers have to chip into the government pot.
A new state commission created by a budget rider authored by Sen. James Eldridge, D-Acton, is studying those tax expenditures and last week agreed to general principals that the public should be able to determine how much is being spent on tax breaks. In addition, they agreed, the breaks should be periodically reviewed.
A list attached to the state budget breaks down each category and their total costs to the state.
Businesses took $44 million in direct tax credits, which provides a dollar for dollar reduction in their tax bills under the investment tax credit. That credit allows up to a 3 percent credit for depreciation of equipment or property.
Another $80 million went to research tax credits which allow companies to deduct all of the first $25,000 in excise tax and 75 percent of any additional excise tax for business-related research.
A total of $10 million went to moviemakers for film tax credits and $25 million was taken in life science development incentives. Listed as expired last year were the home energy efficiency credit and solar heat credit. Dairy farmers used $1.8 million in credits to make their farms more profitable.
The annual budget listing also shows how much more residents would be paying if not for the sales tax exemptions on food, clothes, medicine and alcoholic beverages.
In all, $1.4 billion in sales were exempt from the sales tax. Of that, $682 million came from exemptions on food purchases, $252 million for clothing and $438 million from sales tax exemptions for medical and dental supplies and devices.
Also there is no sales tax on publications like the one you are reading, as no sales tax is charged to buy newspapers and magazines — saving consumers $36.4 million.
Senate Ways and Means Chairman Steve Brewer, D-Barre, who serves on the commission, said a periodic review would help keep track of what at this point is “a mountain of exemptions in the tax code.” No doubt it may also draw questions about which ones are still serving a purpose, and which are not. “What we are saying is that some may have outlived their usefulness,” Brewer said.
Sen. Michael Knapik, R-Westfield, said since 2008 tax expenditures have been listed in the state budget and closer scrutiny of tax breaks will test some as to their merit and intended policy goal.
“Whether we reduce them or not, that is a different question,” he said. The frequency of re-examination should be limited so businesses dependent on tax breaks don’t get skittish about their viability, Knapik said.
“I’ve been here for 20-plus years and I helped in a bipartisan way with many that were designed to make Massachusetts competitive with our peer states or other nations,” he said. “There are agendas at play that would strike out many of these so that we could simply spend the money on programs. The public deserves an understanding as to what these are, why we did them and why they should continue.”