[open-government] New Rule Boosts Govt Transparency of Subsidies

[Phineas Baxandall]

Phineas Baxandall, Ph.D.

Senior Analyst and Program Director

U.S. Public Interest Research Group

(617)747-4351

 <mailto:Phineas at pirg.org> Phineas at pirg.org 

 

 

Good News for Government Transparency: New Disclosure Required for
Government Tax Expenditures and Abatements

 

In a major victory for government transparency, all states and local
governments will now be required to disclose the amount of revenue lost
through programs that grant special tax breaks and abatements for economic
development. The rule issued by the Governmental Accounting Standards Board
(GASB) was the first ever governing such tax expenditures that cost state
and local governments an estimated $70 billion per year but often remain
undisclosed and have lacked standards for reporting.

 

"The public needs to know how much these programs cost in order to judge
whether they deliver enough to justify the lost revenues. Ordinary taxpayers
must pick up the tab when governments issue these tax favors to select
companies," said Phineas Baxandall, Senior Analyst at the U.S. Public
Interest Research Group (U.S. PIRG). "Today is a big victory for government
transparency, even if it falls short of requiring best practice," he added.

 

Many pro-transparency and civic groups were disappointed that the new
standards did not require governments to follow the lead of most states and
several cities in disclosing which companies have received special tax
abatements.

 

For the past six years, U.S. PIRG has tracked how well each of the fifty
states makes data accessible to the public about specific contracts,
subsidies and other outlays. The annual
<http://www.uspirg.org/reports/usp/following-money-2015> Following the Money
reports have shown steady progress as states have made more economic
development expenditure information available to the public through online
tools that allow visitors to search, sort and download the data. A similar
U.S. PIRG study,
<http://www.uspirg.org/reports/usp/transparency-city-spending> Transparency
in City Spending, found major cities are inconsistent in how well they make
data about economic development accessible to the public.

 

"Given that states already publish tax expenditure budgets that often
include this data, the new standard will have the greatest impact on local
bodies of government: cities, counties, townships, and school boards," said
LeRoy, executive director of the nonprofit Good Jobs First, a leading
watchdog of economic development subsidies. "We are especially pleased that
GASB is calling for public bodies that lose revenue passively due to the
actions of other bodies to report such losses. This means school boards will
finally have to own up to the huge costs they suffer when cities and
counties abate or divert property and sales taxes."

 

"Today's decision raises the floor for government fiscal transparency. We
hope that it will also spur governments to reach for higher levels of public
accountability for economic development programs," said Baxandall at U.S.
PIRG. "This isn't a Republican or Democratic issue, just a simple matter of
government being open and accountable with tax dollars."

 

The rule issued today is part of the Generally Accepted Accounting
Principles (GAAP), which government entities are required to follow in most
states and credit rating agencies typically insist are followed to rate
public bonds issued by a government entity. The standards will apply for
economic development tax abatements and special deductions for income,
sales, and property taxes.  The new standards will take effect for budgets
that begin after December 15, 2015, thus making new data available in 2017.

 

To read U.S. PIRG's letter earlier this year to the Governmental Accounting
Standards Board calling for many of the stronger standards issued today,
read
<http://uspirg.org/sites/pirg/files/resources/GASB%20Comment%20Letter.pdf>
here.

 

# # #

 

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