Tax Expenditure Budgets: An Interstate Comparison

The concept of the tax expenditure, first put forth by Assistant Secretary of the U.S. Treasury for Tax Stanley S. Surrey, is a relatively straightforward framework that considers tax exemptions, credits, and other tax-reducing departures from the normal tax structure a form of government expenditure that occurs through the tax system rather than through more traditional systems or methods of payment (Burman, 2003; Minnesota Department of Revenue, 2012). Tax expenditure budgets are now a fairly standard way of codifying and presenting revenue and spending structures for many governments, at the national, state, and lower levels (Burman, 2003). Oregon, Minnesota, and Connecticut all have very clear and concrete tax expenditure budgets, with itemizations of deductions, credits, and other tax code allowances presented as tax reductions to individuals, but with the impact to the state budget presented as an expense in line items or descriptions, and thus a government expenditure that incentivizes or supports the behavior, income type, class, etc. that is affected by the tax credit/exemption/deduction or other form of "tax expenditure" (Connecticut General Assembly, 2010; Minnesota Department of Revenue, 2012; Oregon Department of Revenue, 2012). Pennsylvania, on the other hand, does not create its budget using this framework; though there are certainly credits, deductions, etc., that are similar to the items listed as tax expenditures in the other states' budgets, this is not the perspective the State of Pennsylvania applies to its budget (Pennsylvania Office of the Budget, 2012). This is perhaps reflective of the increasing criticism the tax expenditure framework or model has received from primarily conservative policy makers and analysts, that see the practice as less straightforward in its appraisal of revenues and expenditures than could be accomplished (Burman, 2003).

References

Connecticut General Assembly. (2010). Connecticut Tax Expenditure Report. Accessed 7 April 2012. http://www.ctmirror.org/sites/default/files/documents/TaxExpenditureReportMarch2010.pdf

Minnesota Department of Revenue. (2012). Tax Expenditure Budget. Accessed 7 April 2012. http://taxes.state.mn.us/legal_policy/Documents/2012_tax_expenditure_links.pdf

Oregon Department of Revenue. (2012). A Summary of Oregon Taxes. Accessed 7 April 2012. http://www.oregon.gov/dor/STATS/docs/oregon-taxes-summary-150-800-401.pdf

Pennsylvania Office of the Budget. (2012). Governor's Executive Budget. Accessed 7 April 2012. http://www.portal.state.pa.us/portal/server.pt/community/current_and_proposed_commonwealth_budgets/4566