As Greg LeRoy (GoodJobsFirst)points out, “As states grapple with their worst deficits in more than half a century, policymakers seek better data to help with budgeting decisions. But most states spend the bulk of their economic development budgets almost invisibly, in uncollected taxes, a.k.a. ‘tax expenditures.’”
He continues, “That makes it hard to see — much less evaluate — where most of the money is going. Most states publish a “tax expenditure budget,” but they are inconsistent and often incomplete. Even if they are complete, they don’t stem deficits. That’s because income tax breaks are corporate entitlements, so they deny states budget control. That is, even if a state’s budget is in crisis and appropriations for public services are being slashed, there is no debate about the tax spending; a company just claims the credit if it is entitled to it.”
One promising innovation: Unified Development Budgets — an annual statement to the legislature with all forms of spending itemized in one place. All tax credits (such as those for investment, job creation, enterprise zones or research and development), all tax exemptions (such as sales and utility tax breaks) and all appropriated spending (such as training, manufacturing extension services, loans and loan guarantees). With this system, policymakers can see the state’s true spending priorities and trends.