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Issue Position: Tax Incentives

Issue Position

Location: Unknown

Evaluating Massachusetts Economic Development Tax Incentives

Every investment the Commonwealth makes -- whether it is a line item in the state's budget or a tax credit or other incentive -- must be measured by the benefit to Massachusetts citizens and taxpayers, particularly in these challenging fiscal times.

Accountability for investment of scarce resources must be built into state government.

As State Auditor, protecting taxpayers through fiscal accountability will be the central mission of my office. Using the tools at my disposal -- including financial and performance audits -- I will carefully scrutinize tax credits and other tax incentives offered to Massachusetts businesses to ensure that they continue to provide the benefits the legislature intended when they were first enacted.

Massachusetts has many tax incentives and credits, for purposes ranging from promoting green energy to making the tax code more fair. All should be reviewed for effectiveness, but as auditor I will begin with economic development tax incentives. In fiscal year 2011, the Commonwealth will forego revenue estimated at $1.7 billion through these programs. According to a report by the Massachusetts Budget and Policy Center, while expenditures on economic development tax incentives decreased slightly in fiscal year 2008, as our economy went into recession, these expenditures have otherwise steadily increased since 2002, with recent tax credits extended for the film and life sciences industry[1].

Economic development tax incentives are aimed at attracting businesses in key industries, strengthening the Massachusetts economy and creating jobs. They can play key roles in attracting and keeping businesses in our state. As State Auditor, I will work to make sure that they work as intended. Many of the tax incentives have been in place for years and need to be scrutinized to ensure they have resulted in the job creation and economic growth they were intended to produce.

I will first conduct a broad-based review of all the economic development tax incentive programs. This audit will look at the purpose of the tax incentives, whether there are outcome-based measures and, if so, what outcomes can be attributed to the programs (such as the numbers of jobs created), the costs and benefits of the programs, and report my findings to the Legislature and Administration. And I will make my findings available to the public, so they too can have a role in evaluating the effectiveness of the programs.

I will also conduct audits of those agencies charged with providing or documenting tax incentives provided, where there is sufficient information to do so, to determine whether agencies are utilizing appropriate procedures, providing objective analysis, measuring outcomes as intended, holding recipients accountable for performance, and making information available to the public. I will also provide legislative recommendations for change when the benefit provided does not meet the objectives intended by policymakers. Once again, I will keep the public informed.

Once the audit phase is complete, if the need for change is indicated, I will work to be a catalyst for improving programs through both insight (learning from our experience) and foresight (applying the lessons going forward). This important step will enable both the executive and legislative branches of government, as well as the public, to understand and discuss the desired outcomes of the programs and the features required of each to ensure their accountability and performance.

I will bring this kind of leadership, accountability and results to all of my work as State Auditor in order to help make government work better for the taxpayers and citizens of Massachusetts.

[1] MassBudget Brief: Economic Development Tax Expenditures, December 2, 2009, Massachusetts Budget and Policy Center

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