Tuesday, December 20, 2011

Putting Some Sunshine on Tax Credits

WAMU is running a story this morning by Michael Pope on some legislation that I am introducing next session regarding shining some light on tax credits.

During the last two years I have been elected, I have been astonished at the number of tax credit bills that I have seen go through my Chamber.  Towards the end of last session, several of us were discussing these and the cumulative effect they are having on our budget - especially given how picky we are being about expenditures because Virginia's budget situation is so horrific.

For example, in the last two years, I have noticed the following:
  • A $4M tax credit for movie production;
  • A $40M tax credit for coal production;
  • A $4M tax credit for wineries;
  • A $2M tax credit for Virginia's ports;
  • A $2M tax credit for research & development (I voted for this one);
  • A $2M tax credit for telecommuting;
  • A tax credit for creating "green" jobs.

I'll be introducing my own tax credit bill this year to allow people to claim them for solar panels, geothermal heat pump systems, and solar hot water systems.   Every state surrounding us already has them along with the federal government. 

The list goes on.  Virginia has other tax credits for donating land for open space, historic preservation, "major business facilities," day care facilities, etc.  There is a great list on the Department of Taxation's website which is not exclusive.  As you can see, they make for great brochures (e.g. grist for the legislative re-election mill). 

They also make for great pork.  From my point of view, many times these credits reward interests with the best lobbying teams and if I were an interest looking for an appropriation, it is a lot easier to pass if it were called a tax credit than simply putting a line item in a budget that says $4,000,000 to Steven Speilberg, $2,000,000 to Donald Trump (for his new winery), or $1,000,000 to Daddy Warbucks to keep 500 acres on his country estate free of development. 

The fiscal reality of a tax credit is that they are a dollar-for-dollar credit against your taxes.  The effect upon taxpayers is exactly the same as the government writing a check to someone unlike a deduction where you only get a benefit at your marginal tax rate (you get credit of roughly 20%-50%). 

That's why I am introducing that requires the Department of Taxation to annually publish a list of every taxpayer who claims a tax credit along with the amount and credit claimed with some exceptions (e.g. the low income tax credit and the credit for tax paid to another state).   All government expenditures are subject to public scrutiny - there is no reason that a benefit claimed from a tax credit should not be as well.

If any taxpayer is going to reap this kind of reward from taxpayers, there ought to be sunshine on the process so that if these things are the results of special interests, voters can connect the dots between political contributions and benefits and so that the effectiveness of credits themselves can be evaluated by the public. 

Sunshine is the best political disinfectant.  Let it shine on in.

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