Proposed Amendments to the Existing Model Policy, Tax Expenditure Transparency Act

Proposed Amendments to the Existing Model Policy, Tax Expenditure Transparency Act

Summary

The legislature finds that the state’s tax code includes tax expenditures enacted to achieve a variety of policy goals for the public interest. The ultimate goal should be for the state’s tax system to reflect sound principles of taxation. In order to make policy choices going forward regarding the best use of limited state resources, the legislature concludes that it is necessary to articulate the legislative intent and have measurable performance goals for each tax expenditure created. It is also necessary for a comprehensive tax expenditure report to be compiled to assist the legislature in deciding whether or not to continue existing tax expenditures.

Model Policy

Short Title.

This Act shall be known and may be cited as the “Tax Expenditure Transparency Act.”

Section 1.

(A) For purposes of this section, “tax expenditure” means a provision in the tax code that provide incentives for particular kinds of activities or that give special or selective relief to certain groups of taxpayers. “Tax expenditures” are considered deviations from the normative tax base.

(1) “Tax expenditures” shall not include:

(a) deductions to arrive at income under an income tax;

(b) exemptions of business inputs under a sales tax;

(c) deductions or credits used to offset a discriminatory tax or fee.

(B) For any bill introduced in either the House of Representatives or the Senate that adopts a new tax expenditure or expands or extends an existing tax expenditure, the bill shall include legislative intent provisions, establishing the policy goals and any related metrics.

(C) All existing tax expenditures without legislative intent provisions establishing policy goals and any related metrics shall have these sections added. Any tax expenditure which does not have these sections added within two years shall be discontinued.

(D) A comprehensive report detailing every tax expenditure and its effect on state revenue shall be compiled every two years, including fiscal notes for each tax expenditure.

(E) Every two years, subsequent to the comprehensive tax expenditure report, all tax expenditures shall be reviewed to determine if they are meeting their stated legislative intent and are worth the cost of continuing.

(F) Every two years, subsequent to the comprehensive tax expenditure report and review of tax expenditures, all tax expenditures shall require an affirmative vote of the Legislature. Any tax expenditure failing to gain approval shall be discontinued.

Section 2. {Severability clause}

Section 3. {Repealer clause}

Adopted by the Tax and Fiscal Policy Task Force at the Annual Meeting, August 9, 2013.  Approved by the ALEC Board of Directors, September, 30, 2013.