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MASSPIRG and Common Cause Massachusetts called for improved transparency of corporate tax breaks at a State House hearing today. The groups urged the Joint Committee on Economic Development to support An Act to Promote Efficiency and Transparency in Economic Development, S.173/H.325 and an Act Relative to Transparency of Economic Development Spending S.174/H.324 filed by Representative Carl Sciortino (Medford) and Senator Eldridge (Acton) along with 25 other cosponsors, both Democrats and Republicans.
“The ability to see how government uses the public purse is fundamental to democracy. Transparency in all government spending checks corruption, bolsters public confidence, and promotes fiscal responsibility,” testified Deirdre Cummings, Legislative Director for MASSPIRG. “Any investment of public dollars in private enterprises must be held to the highest level of transparency and accountability.”
“Massachusetts spends hundreds of millions of dollars each year on economic development subsidies, and yet legislators, the administration, and the general public often don’t know where that money is going, how many jobs are actually being created, and whether the Commonwealth is getting a good return on its investment,” said Senator Jamie Eldridge. “That’s unacceptable. It’s time to make all this information public and start holding companies accountable for creating the jobs they promise to create.”
The bills require that all economic development tax breaks on both the state and local level be transparent and posted on the state budget website; require improved reporting data to evaluate the success of the investments; require that all tax breaks be affirmatively reviewed and reauthorized after 5 years; set standards for successful economic development programs; and holds companies accountable to their job-creation commitments by requiring companies to pay back the value of the tax break if they fail to meet their promised commitments.
“Government transparency is critical to a healthy democracy. It is especially important when government subsidizes particular interests with public resources,” said Pam Wilmot, Executive Director of Common Cause Massachusetts.
Last month MASSPIRG released a new report called “Getting our Money’s Worth? Promoting Transparency and Accountability for Corporate Tax Subsidies in Massachusetts.”
The report provides analysis of Massachusetts’ special business tax breaks and finds taxpayer dollars are being put at risk due to a lack of accountability measures in many programs. The report analyzes 25 special business tax breaks worth a total of $770 million and found that many tax subsidy programs lack adequate accountability measures, like goals for job creation, recapture measures requiring companies to return subsidies when they fail to deliver promised benefits, sunset dates for subsidy programs, and adequate public transparency and reporting to enable independent assessment.
Massachusetts is a national leader in making many forms of state spending transparent, yet many corporate subsidy programs lack of openness and accountability. The report findings echo many of the reforms called for by last year’s bipartisan Tax Expenditure Commission.
Spending through the tax code merits particular attention because it is not subject to the normal, annual public scrutiny of other line-item spending in the state budget. Unlike conventional budget items, the annual cost of such spending may not be known until after the money is spent. And because programs are often automatically renewed each year, they can continue to impose costs on the Commonwealth without undergoing thorough consideration and annual approval by the Legislature and Governor.
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