Gauging Effectiveness of Tax Policy
In any kind of system–computers, manufacturing, planned maintenance, what have you–the importance of a “feedback loop” is recognized. Basically, you have a process or method in place and you want input as to how well it is working. “Good” feedback often necessitates a change in operating process or, possibly, system design. In yesterday’s ProJo, John Kostrzewa essentially asks that our corporate tax policy–specifically targeted tax credits for certain businesses–be put in a feedback loop. The question: are we getting the benefits we hoped for (more jobs) when we let companies pay the state less in corporate taxes?
This is the way economic development gets done across the country. A corporation has jobs. The government has giveaways or tax breaks. They woo each other, get married and everybody lives happily ever after.
Except nobody checks back to see if the incentives really accomplished what they set out to achieve.
But now, Rhode Island has started to take a peek.
As Kostrzewa explains, current head of the Department of Revenue Gary Sasse advocated for just such a review process when he was running the Rhode Island Public Expenditure Council (RIPEC):
When he ran the Rhode Island Public Expenditure Council, he advocated tax breaks that are accountable, transparent and targeted toward specific types of jobs. As head of the state Department of Revenue, he pushed forward the collection of data. He also headed the tax reform panel created by Governor Carcieri that advocated a study of job-creation tax credit and questioned why they shouldn’t be reserved for higher-paying jobs with benefits.
But now, in his additional role as head of the Department of Administration, he seems less aggressive.
Sasse says that such a study would be “complex.” Well, that’s too bad, such a study should be done to see if it’s actually working. And if targeted tax cuts don’t work, maybe the solution lay in broad based tax incentives, huh?