The Massachusetts Department of Revenue recently released a report detailing that $14.6 million in tax creditA tax credit is a provision that reduces a taxpayer’s final tax bill, dollar-for-dollar. A tax credit differs from deductions and exemptions, which reduce taxable income, rather than the taxpayer’s tax bill directly. s were given to filmmakers in 2010, yet the film taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. -incentive program only generated $800,000 in new state revenue. While these numbers certainly make the program look like a drag on the tax code, the results could have been worse. In 2009, the special tax program gave out $82.4 million in credits, and only collected $10.4 million in revenue.
Fortunately, these sorts of tax credits (or tax expenditureTax expenditures are a departure from the “normal” tax code that lower the tax burden of individuals or businesses, through an exemption, deduction, credit, or preferential rate. Expenditures can result in significant revenue losses to the government and include provisions such as the earned income tax credit, child tax credit, deduction for employer health-care contributions, and tax-advantaged savings plans. s) are being targeted for another look by the Massachusetts Department of Revenue. In fact, they recently created the Tax Expenditure Commission to examine each of the state’s tax expenditures and consider reform. Jay Gonzalez, the Chair of the Commission, said in their October meeting:
“The tax expenditure system represents years and years of ad hoc decisions. There is no real, comprehensive rationale holding all the tax expenditures together. One goal of this Commission should be to start from the understanding that no tax expenditures are sacrosanct, in essence start from scratch.”
I couldn’t have said it better myself.
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