For Immediate Release
March 6, 2007

Contact: Alan Essig, Exec. Director, (404) 420-1324 - (770) 402-4630 (cell)

GBPI Releases Report Calling for Greater Openness and Transparency in Regards to Tax Expenditures

Atlanta -- The Georgia Budget and Policy Institute (GBPI) has released Show Us the Money: Transparency Needed on Tax Breaks. This report is an update of a report released in 2004. This report discusses other states' experiences with tax expenditure reports and highlights what a tax expenditure report should contain.

Tax expenditures are tax law provisions that exempt certain individuals, income, goods, services or property from being taxed. Tax expenditures reduce Georgia's revenue collections and are therefore a form of government spending through the tax system. Every dollar "spent" through tax expenditures is a dollar not available for government services or for a lower tax rate. Unlike direct appropriations, tax expenditures enacted without sunset provisions are rarely reviewed by policymakers nor included in the public budget process. Today 39 states conduct some form of tax expenditure report, which provide data on all tax expenditures annually or biennially. The intention of these reports is to provide state legislators and the public with data required to make sound fiscal policy decisions. 

"Sound budget and fiscal policy demands that policymakers thoroughly examine Georgia's broad scope of government spending. This can only be accomplished when direct spending and tax expenditures are fully disclosed and reviewed simultaneously," said Alan Essig, executive director of GBPI. "To facilitate this cost-benefit analysis, Georgia should require by law the inclusion of a tax expenditure report in the Governor's annual budget," said Essig.

As Georgia decides how to respond to the growing needs of the state, all sources of spending must be on the table. Policymakers must assure Georgians that tax expenditures on the books make as much sense for Georgia today as they did when first enacted. Cuts in education and health care are not Georgia's only choices. Elimination of ineffective tax expenditures and closing of significant tax loopholes are viable sources of revenue. A recent report by the Georgia Department of Audits recommended that "consideration should be given to collecting, reporting, and evaluating activity data related to tax incentive expenditures and outputs."

To achieve a full disclosure on all spending (appropriation or tax expenditure), to facilitate an informed budget process, and ultimately to ensure a fair and equitable tax system, Georgia should:

• Include a Tax Expenditure Report in the Governor's Budget Report that includes, for each tax expenditure, an overview, summary analysis, sunset provision analysis, five-year estimated revenue loss, and descriptive list of expenditures by tax program.
• Perform cost/benefit analysis of tax expenditures. Every dollar "spent" through tax expenditures is a dollar not available through appropriations or an inflated tax rate. Do tax incentives work?
• Conduct mandatory periodic review of all tax expenditures. Every tax expenditure should include a sunset of anywhere between 2 and 10 years depending on the tax expenditure's purpose, beneficiaries, fiscal impact, and the economic conditions.
• Develop a report on foregone revenue sources such as services not covered by the sales tax.
• Perform tax incidence analysis. Georgians deserve to know the distributional impact of tax burdens, or "who pays" state taxes. Ten states have developed the capacity to analyze how proposed changes in their tax laws would affect the amount of taxes owed by different income groups. Policymakers should consider the "winners" and "losers" in all major tax proposals.

"In light of funding shortages in Peachcare and continued austerity cuts in education, it is vitally important that tax expenditures be examined with the same scrutiny as budget expenditures," said Essig. "A tax expenditure report assures accountability and transparency within the policy making process."

Mr. Essig is available to answer questions regarding the GBPI report and can be reached at 404-420-1324 (office) or 770-402-4630 (cell)

All of GBPI's research reports are available on its web site at www.gbpi.org.

ABOUT GBPI
The Georgia Budget and Policy Institute (GBPI) is the state's leading independent, nonprofit, nonpartisan organization engaged in research and education on the fiscal and economic health of the state of Georgia. The Institute provides reliable and timely analysis of Georgia's budget and tax policies and promotes greater state government fiscal accountability, improved services and enhanced quality of life for all Georgians.

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