I am more than a little puzzled as to why a report issued by the highly respected
Virginia Joint Legislative Audit and Review Commission (JLARC) staff last month did not make front page news throughout the Commonwealth.
In its “Review of the Effectiveness of Virginia Tax Preferences,” the independent, nonpartisan JLARC staff wrote that a “minority of public or tax policy preferences are subject to formal evaluation or reporting.” Of the 187 total categories of total tax preferences, or credits, examined for tax year 2008, the last year for which complete data are available, 131 different tax credits worth $11.3 billion have “no formal oversight.”
Of the remaining number worth $1.2 billion, 36 are subject to reporting only and 20 are subject to reporting and evaluation. The number evaluated on effectiveness in meeting policy goals: zero!
The sheer volume of tax credits available in Virginia is itself astounding. They represented about $12.5 billion in reduced taxpayer’s liability in 2008 which is nearly 90 percent of the $14.3 billion of the state revenue collected from the tax systems reviewed.
One organization that describes itself as “a broad-based coalition of business people, local elected officials, and nonprofit advocates and community leaders representing over 39 organizations from across the state” described the study as “detailing many of the myriad of often costly, inefficient, and ineffective loopholes, credits and breaks littered throughout the Virginia tax code.”
The subject of tax preferences is particularly relevant at this time with the state
facing a shortfall of about a billion dollars in revenue for the coming biennium. Federal stimulus monies that have made major contributions to balancing the state’s budget for the past couple of years are no longer available.
The more than $600 million borrowed from the employees’ retirement fund must be paid back. Easy cuts to reducing the state’s budget were made years ago, and the already-made reduction of $7 billion has cut into the muscle and bone of state programs and services.
In addition to simply making more spending reductions, should the state examine its tax code to see if the numerous “tax loopholes, credits and breaks” be examined for their appropriateness and effectiveness? Sounds like the same debate that is going on at the federal level.
One thing the JLARC reports tell us is that Virginia, the best managed state in the
union, has little information on tax preferences, “including which ones should be continued because they are effective, and which ones could be revised to improve their effectiveness or eliminated altogether.”
Agencies and organizations receiving state monies are held to strict accountability standards. Should we expect anything less from those getting a tax break?