New Report Sheds Light on Tax Expenditures
By: Ali Mickelson, Director of Legislative & Tax Policy
Because of the chokehold on our state spending due to TABOR, it’s imperative for legislators to use our limited tax dollars in the most thoughtful way possible. Unfortunately, lawmakers have long had a blind spot in evaluating the budget because there hasn’t been any meaningful assessment of spending that occurs through the tax code, also known as tax expenditure.
Transparency and accountability, important parts of what the National Conference of State Legislatures considers hallmarks of good tax policy, have been sorely lacking in Colorado. Until now.
On Friday, September 14 the Colorado Office of the State Auditor (OSA) released the first part of a new five-year tax expenditure evaluation, titled the Tax Expenditures Compilation Report.
This report, which CFI helped lay the groundwork for with bills in 2015 and 2016, “audits” all of the tax credits, exemptions, and deductions in Colorado’s tax code to determine if they’re meeting their intended purpose and doing so in an efficient and effective manner. Over the next five years, OSA will provide an evaluation of the state’s more than 200 tax expenditures, including those related to income tax, sales tax, severance tax, and sin taxes. The reports will look at the intent behind each credit and, using comparisons to other states, evaluate taxpayer data and other available resources, including whether each credit is working as intended. If OSA finds a credit that isn’t working as it should, they’ll make recommendations on improving or eliminating the credit.
Now the report is finally here, and we’re encouraged to see the thought and effort that OSA used in creating this evaluation. With only an outline of the questions to be answered, they developed an incredibly valuable and accessible analysis of all of the tax expenditures they reviewed. This report is an example of good government creating good governance, with the information in this report and the ones that follow allowing lawmakers to make better decisions about where they spend our collective tax dollars.
Good fiscal and tax data matters because it allows citizens and lawmakers to make educated analysis and recommendations about tax and budget policies. This report is another example of what good data can reveal and we look forward to working with lawmakers to use these reports to make good decisions about the best use our limited resources.
