Evaluating Tax Credits

Tax credits are in the public eye more and more these days, promoted as the way to get state economies back on track and grow jobs. Yet too often credits are not evaluated to see if they deliver on their promise.  Previously I blogged about a series of reports on tax credit evaluation from Good Jobs First.  Now the Pew Center on the States has released a report titled Evidence Counts: Evaluating State Tax Incentives for Jobs and Growth. 

Pew used four criteria to evaluate how well states evaluate tax credits:

• Are the evaluation results built into policy and budget deliberations?
• Are all major tax incentives evaluated regularly?
• Does the evaluation ask and answer the right questions using good data and analysis?
• Does the evaluation draw clear conclusions about the tax credit?

So, how does Maryland fare?  Not well.  Pew found that Maryland failed to meet any of the four criteria for good tax credit oversight.  Maryland thus fell into the category of states trailing behind national trends in evaluating tax credits. 

The General Assembly moved in the right direction this session by passing two bills improving oversight of tax credits.  The Tax Credit Evaluation Act (SB 739/HB 764) establishes a periodic review process for some tax credits, which sets a precedent for evaluating other tax credits in the future.  Senate Bill 1086 (HB 1456) requires taxpayers claiming certain business tax credits to do so electronically, thus making oversight and data analysis easier for the Comptroller's office and others.  MBTPI supported both bills, and both now await the Governor's signature.