The success of the Massachusetts economy is largely due to having the best-educated workforce in the nation, a thriving biotech and life-sciences industry, and a continuing transformation from manufacturing to a research-and-development and service economy. Our quality of life draws talented people and a consumer market with strong buying power. But, for want of funding, the state is unable to support critical public services that sustain its economic foundation — universal early childhood education, essential job training programs, long-needed maintenance and repair of our roads and bridges, among many others.
The reason for this is that our tax system is structurally unsustainable, and remains bottomed out on special tax breaks for businesses, to the tune of over a billion dollars a year. Do those tax breaks serve a purpose that justifies the expense? We think not. But, then again, we have little way of knowing. Unlike a growing number of states, Massachusetts has no system for evaluating the effectiveness of these special tax breaks. These breaks are not reviewed in the annual budget process, so we are spending tax dollars every year with no scrutiny as to whether any important goals are achieved.
A new Pew Foundation report places Massachusetts in the bottom tier when it comes to evaluating tax breaks . . . excuse us, “incentives.” The study grades Massachusetts as among 23 “trailing states,” and highlights that we have not yet enacted policies requiring regular evaluation of the effectiveness of major tax incentive programs. Why haven’t we?
Other New England states are on the ball in their evaluations. Pew lists Maine as a “leading state,” based on policies enacted in 2015 after a task force recommended trimming $40 million in dubious tax incentives. Connecticut, Rhode Island, and New Hampshire are recognized as “making progress.” Pew rightly points to Rhode Island’s new evaluation law, which followed on the heels of former Red Sox pitcher Curt Schilling’s $75 million loan that resulted in an “economic development disaster.”
With our strong economic foundation and promise for the future, we know that Massachusetts can do better. It’s unsettling that the playbook other states are using to quantify and effectively manage these corporate tax-break programs was written in Massachusetts. The best practices that Pew identifies largely match the recommendations made by the Massachusetts Legislature’s bipartisan Tax Expenditure Commission in 2012 that called for measuring and evaluating these tax breaks. The Joint Committee on Revenue has used this report to guide bill drafting and decisions for the past five years, but we’ve been unable to codify these best practices into law.
Our 2012 report prompted a major focus on tax expenditures by the National Conference of State Legislatures, and since then, 21 states and the District of Columbia have approved laws requiring regular evaluation of corporate tax breaks. Pew’s study found that, in almost every case, adopted legislation received strong bipartisan support and brought together supporters and skeptics for comprehensive reform of tax incentives. It is ironic that the Commonwealth launched this vital economic stabilizer in 2012 and has fallen so far behind other states since then.
Legislators are now engaged in shaping the Commonwealth’s budget. It’s time for us to give Massachusetts the same tools as many other leading states to scrutinize and measure the effectiveness of the tax incentives we provide companies that do business here. Let’s finish what we started.
Editor’s Note: Boston Globe Media Partners, which owns the Globe, received a $1.3 million, 10-year tax abatement from Taunton, where the company has built a printing operation. The agreement does not involve state tax credits.
State Senator Michael Brady and state Representative Jay R. Kaufman are cochairmen of the Joint Committee on Revenue.