Bell testifies in favor of tax credit transparency
Rich Jones, director of policy and research at the Bell Policy Center, testified on Thursday in favor of House Bill 1052, which would add pay-as-you-go requirements to new tax exemptions and credits.
We are disappointed to report that the bill died in a 6-6 vote of the House Finance Committee.
We supported the bill because we believe it would add accountability and transparency to the budget process, and we believe it is only common sense to weigh the costs and benefits of tax credits and exemptions in pursuit of policy goals.
Here is a portion of Jones' testimony:
"... Unlike spending decisions, which are carefully scrutinized and reviewed by the governor's budget office and legislature's Joint Budget Committee every year, there is limited review of tax exemptions and credits. We enact them and then forget about them. Yet they account for more than one-quarter of our General Fund revenue and are paid for "off the top," before we fund any other aspect of state government.
"Therefore, it is particularly important before we create new or expand existing tax credits and exemptions that we do a thorough job in calculating the amount of revenue the state will give up as a result of the proposals, describing how the credits will achieve their intended objectives and determining how any reductions in revenue will affect funding for existing public services and systems. ...
"Because the legislature does not regularly go back and review the costs and effectiveness of existing tax credits and exemptions, it is critical that we do so at the front end, before new ones are created or existing ones expanded.
"Colorado faces a projected shortfall of more than $1 billion for the coming fiscal year, in which it is expected to raise about $7 billion in total General Fund tax revenues. The total value of all existing tax credits and exemptions equals about $2 billion a year, or about 28 percent of General Fund revenue. Any new or expanded tax credits and exemptions will add to this shortfall unless paid for with spending cuts or revenue increases.
"We think it is common sense that before we add to our shortfall we at least discuss the value of new or expanded tax credits and how we will pay for them."