With billions in ‘tax expenditures,’ legislature ignores spending cap


What are the odds that the Connecticut Legislature would violate its own laws? Would the odds go up or down if those laws concerned billions of dollars?

The billions of dollars involve what is known as tax expenditures. These are tax laws intended to subsidize selected economic activities and favored taxpayers. Because these subsidy measures are equivalent to spending programs implemented through the tax system, they are commonly known both in Connecticut and throughout the country as “tax expenditures.”

The recent jobs bill, which adopts a new job expansion credit, is the latest example. The Governor’s “First Five” program, doling out millions of special tax provisions is yet another illustration. Even before this recent largesse, the State estimated the cost of tax expenditures as over $5 billion.

Many of these tax expenditures are uncapped in amount. All are end runs around the legislature’s cap on spending and debt because they do not count for those purposes.

For more than a decade, the legislature has quite appropriately required that it review and analyze these tax expenditures. The legislature has also called for a specific, detailed analysis of corporate tax credits. Certainly the evidence from around the country suggests that most of these incentives cannot survive a cost benefit so that such a legislative study is obviously warranted.

Given this evidence from other states and the staggering amounts at stake, it is inexplicable why the legislature has essentially ignored its own mandate and not conducted the required study. Or is it?

Only a few corporations receive the lion’s share of the economic incentives. The more cynical will find the legislature’s violating its own laws entirely understandable. Why bite the hand that feeds you with contributions?

Billions of dollars on the table, and with a few exceptions, neither the public nor legislators know by name of recipient which corporations claimed what credits and in what amounts. Imagine how different the recent debate over laying off state employees might have been if instead of threatening to lop off heads, the state had enough information to have lopped off loopholes instead.

Ferreting out waste on the spending side of the budget is of course entirely justified. Ignoring billions of dollars of spending through the tax system is not. The governor, who is committed to transparency and accountability in government, and who took no private money in his campaign, should be appalled by the legislature’s flouting its own law.