This legislative session, Arizona PIRG has made it a priority to testify before the state legislature on the need for transparency and accountability in corporate tax credits. Already lawmakers have considered several bills that would enact new tax credits or expand existing ones. Today I testified before the House Commerce committee when it considered HB 2646, which would create a tax credit for high tech investments funded by insurance companies.
For this bill and other tax credits lawmakers consider, there should be common-sense practices to increase the transparency and accountability of special business tax subsidies in order to protect the public. Tax credits are really a form of spending, but rather than going through the appropriations process, it's done through the tax code. And this special spending through the tax code merits particular attention because it is not subject to the normal public scrutiny of line-item spending in the state budget.
Unlike conventional budget items, the annual cost of such spending may not be known until after the money is spent. And because programs are often automatically renewed each year, they can continue to impose costs on the State without undergoing thorough consideration and annual approval by the Legislature and Governor.
Every year legislators have to authorize how to spend taxpayer money during the budgeting process. And every five or ten years they have to vote to retain each state agency and program when it hits a sunset date. Even though tax credits are spending through the tax code rather than through appropriations, many never have to face another legislative vote once they are established.
Furthermore, there should be thorough reporting on what these tax credits are doing and that information should be publicly reported in an easily accessible online format. After all, taxpayers deserve to know how their tax money is being spent.