North Carolina is among more than 40 states that produce regular reports on the tax breaks lawmakers have enacted over the decades. But those who try to analyze the breaks say the state could do a much better job describing, explaining and publicizing those tax breaks so that lawmakers, the governor and the public can properly evaluate them.
Alexandra Forter Sirota, director of the N.C. Budget & Tax Center, a nonprofit that advocates for lower income residents, found that out the hard way when the center launched a study to find tax breaks that should be reconsidered. The state reports were so lacking in detail that the center could not put together a good assessment of many tax breaks.
“We found a real lack of data and information out there,” Sirota said. “There was a number of them, the history of them we couldn’t even track down.”
North Carolina’s report is published every other year by the state Department of Revenue. The 130-page report lists every tax break on the books and their estimated cost. The total from the most recent report: $9.2 billion.
The Center on Budget and Policy Priorities, a nonpartisan think tank, evaluated the tax break reports three years ago and found North Carolina’s provide little insight as to why roughly 300 tax breaks are on the books. The reports don’t say when many tax breaks were first enacted, and rarely say how much they have grown or shrunk in cost to the state over the years.
The reports don’t explain which tax breaks have grown or by how much. Nor do they explain when many were written, by whom or for what reason. Readers would have to compare old reports with new ones to learn how much the estimated cost of taxes has grown.
Nicholas Johnson, one of the budget and policy report’s authors, said when government and the public don’t see the cost of tax breaks, they make bad decisions when assembling a budget. Without that information, the debate shifts to cutting spending for education, law enforcement, health care and other services, or finding new taxes to pay for them.
“When you take tax breaks off the table, it puts pressure on everything else,” Johnson said.
David Hoyle is a former state senator from Gaston County who served as revenue secretary for Gov. Bev Perdue until January. He was a top tax writer for the Senate for several years. He said as a lawmaker, he paid little attention to the tax break reports, and he added he was as guilty as anyone of putting tax breaks on the books without having a sense as to the cumulative ramifications.
“We did what we did, and sometimes maybe we should have taken a … deeper look at it,” said Hoyle, a Democrat.
But the state also had no tax reports for many of Hoyle’s 18 years as a lawmaker. The biennial reports were ceased after the 1992 report and weren’t started again until the 2004 report. Today, they are simply distributed to lawmakers with no presentation or news release. The next one is due before lawmakers return to Raleigh for the short session next year.
Hoyle said it would be difficult to produce a more informative report amid the staffing cuts that have taken place in the past few years.
A handful of other states are producing more informative reports and paying closer attention to tax breaks. In 2011, for example, Oregon saved $30 million by whittling down tax breaks.