Tax expenditure laws continue to drain billions of dollars – more than $18 billion in Fiscal Year 2017-18 – in potential state revenues each year. These laws are not regularly scrutinized to ensure that they deliver a benefit to taxpayers or the state’s economy. State lawmakers should adopt legislation to require regular and rigorous tax expenditure evaluations to ensure that the foregone revenues serve a good public use. Tax expenditures that are unproductive or not serving a public good should be revised or eliminated. “Found” revenues that result from these evaluations can then be invested in critical services such as education, health and transportation, and be used to grow the state’s economy.
Silent spending, in the form of numerous types of tax expenditures, continues to drain billions of dollars in potential state revenues each year. Total tax expenditures cost Florida in excess of $18 billion in Fiscal Year (FY) 2017-18, an increase of more than 3 percent over the previous year.
Unlike money spent through the state budget process, this shadow budget reflects resources that are “spent” through Florida’s tax laws. While spending through the state budget takes the form of collecting revenues and appropriating these to be expended, spending through the tax code, tax expenditure, takes the form of revenue the state foregoes. In either case, the result is the same: public resources are designated for a specific purpose.
State tax expenditures are not inherently good or bad. The problem with them is, unlike spending through the budget, which is subject to yearly review and reauthorization, spending through the tax code is not routinely evaluated to ensure that it is delivering on objectives that support the state’s economy. Once enacted, these expenditures tend to remain in law without an expiration date or regular review.
Stronger evaluation and routine monitoring of such silent spending would give policymakers and the public a better understanding of whether the foregone revenues are truly benefitting Floridians. Evaluation provides the evidence necessary to determine which tax expenditures are serving a public purpose and which are unproductive or squander public resources.
Tax expenditures that are not serving a public purpose or are unproductive should be modified or eliminated. Such action would increase revenues available for investing in critical services to meet the state’s growing population needs and fund investments that are important for future economic growth. The elimination of unproductive tax expenditures also simplifies the state tax code, makes the tax system fairer and eliminates unfair business competition.