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Buono Tax Expenditure Reporting Bill Approved By Budget Committee

TRENTON – A bill sponsored by Senator Barbara Buono (D-Middlesex) that would require the Governor to include in his annual budget message a report on state tax expenditures was approved 8-0 with six abstentions today by the Senate Budget and Appropriations Committee.

New Jersey provides a variety of tax credits, deductions and exemptions that reduce state revenue, but these expenditures are not included in the Governor’s budget message.

“These tax expenditures should be looked at as carefully as every other item of state spending contained in the state budget,” said Sen. Buono, who is chairwoman of the committee. “There is no reason for significant expenditures like this to not be thoroughly evaluated. The state budget process requires us to conduct an extensive review of all direct spending, but tax expenditures, which are off-budget items, are not regularly scrutinized.”

Sen. Buono’s bill (S3153) is designed to help legislators decide if these spending items are serving their originally intended purpose and should be continued.

“Most of them are written into the tax code and continue indefinitely unless the Legislature discontinues them,” Sen. Buono said. “Appropriated expenditures from the State’s General Fund, by contrast, typically last as long as the State’s budget cycle, which is one year.”

Under the bill, the tax expenditure report would be included in the Governor’s annual budget message, which is available online. The report will list the State’s tax credits, deductions, and exemptions along with their costs as well as other relevant information to help legislators evaluate their effectiveness.

“This bill will establish new reporting requirements and will integrate them into the budget process,” Sen. Buono said. “If the tax expenditure report is not included in the Governor’s annual message, you can be certain that the respective legislative budget committees will hold the Treasurer accountable when he or she appears before them in the course of the annual budget hearings. This will enhance transparency in government spending.”

The legislation is based upon the best practices identified in the report entitled Promoting State Budget Accountability Through Tax Expenditure Reporting issued by the Center on Budget and Policy Priorities in April of this year. These practices include incorporating the report into the budget process, issuing the report regularly, making it available on the Internet, and detailing the estimated amount of State revenue lost for the last completed fiscal year, the current fiscal year, and the fiscal year to which the budget message applies.

“Right now, New Jersey is one of only nine states that does not issue a tax expenditure report,” said Buono. “Having regular tax expenditure reports will provide the Legislature with the tools to carry out a comprehensive cost-benefit analysis.”

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