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Panel urges restraint on Massachusetts tax breaks

By Bob Salsberg
Associated Press / April 23, 2012
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BOSTON—Massachusetts should pay far closer attention to the estimated $26 billion in tax breaks it hands out each year, a special commission said Monday.

The Tax Expenditure Commission, formed last year by Gov. Deval Patrick and the Legislature, unanimously approved a final report that calls for fewer and less generous tax breaks in the future and a periodic review of all existing breaks to make sure they are achieving worthwhile goals.

The panel, chaired by Secretary of Administration and Finance Jay Gonzalez, examined a vast array of tax breaks, including exemptions, credits and deductions apart from the state's normal tax code.

Gonzalez, in a statement, said the report is a "comprehensive roadmap" to reforming the system.

"We must do everything possible to ensure that every taxpayer dollar is being invested as effectively as possible -- and that includes taxpayer dollars we choose to invest in the form of tax breaks," he said.

An analysis last year by state Auditor Suzanne Bump of 92 business tax breaks, some in existence for decades, found that only a handful had mechanisms for reviewing their effectiveness or recouping lost revenue if the exemptions failed to produce an economic benefit to the state.

Bump called Monday's final report "a major advance in government accountability."

The state has estimated that when all the various tax incentives and exemptions are added up, Massachusetts is forgoing about $26 billion in revenue, which exceeds the total amount of taxes the state is expected to collect in the current fiscal year.

The bipartisan commission, including state officials, lawmakers and economists, met nine times since October. Among its recommendations:

-- Reducing the overall number and cost of tax breaks and basing future breaks on a specific set of criteria that would be established in the future by the governor and Legislature.

-- Requiring an automatic, periodic review of all tax breaks, known as a "sunset" provision. Discretionary "grant-like" tax breaks would be reviewed every five years for their effectiveness.

-- Establishing "clawback" provisions, which allow the state to recoup all or a portion of the value of tax breaks if recipients fail to live up to commitments they have made.

The state's policy on tax breaks came under fresh scrutiny last year when Evergreen Solar closed a factory at a former military base in Devens and laid off hundreds of workers after receiving more than $30 million in direct grants and tax and lease breaks. The company later filed for bankruptcy.

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