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The Assembly Appropriations Committee and the Senate Budget and Appropriations Committee Monday approved legislation to require the state budget to include a detailed accounting of the various tax breaks allowed under law as part of an attempt to measure whether the deductions or write-offs are meeting their stated goals.

Under the legislation, A-2139/S-3153, the governor’s annual budget message would be required to include detailed reporting on the fiscal impact of all policies that allow individuals and corporations to lower their individual tax liabilities; budget documents currently only report how much is raised through actual taxation. The report would identify the statutory authority for each tax allowable tax break and determine whether it has been effective in achieving its goal.

“It’s very easy to tell whether a certain tax is an economic help or a hindrance, but we have practically no way of telling whether the many tax credits, deductions and cuts on our books are actually making the grade,” said Assemblywoman Linda Greenstein (D-Middlesex), a co-sponsor of the measure in the lower house “If our ultimate goal is a tax code that is fair to all taxpayers, we need to look not only at what people are paying, but what we are allowing some people to not pay.”

Greenstein and Assemblyman Wayne DeAngelo (D-Mercer), a co-sponsor, said the report would allow lawmakers to assess state tax policy as a whole in order to propose beneficial reforms.

“Everyone likes a tax break, but when a loophole that’s well past its time is continually exploited to save one filer money it inevitably falls to everyone else to make up the difference,” DeAngelo said. “We cannot make tax policy in a vacuum. To properly determine the effectiveness of our tax laws, we need to know not just how much the state is taking in, but what’s on the other side of the ledger, as well.”

New Jersey Policy Perspective, a Trenton-based think tank, supports the legislation.

“This bill is about information,” said NJPP Policy Analyst Sarah Stecker, who testified before both committees. “At a time when New Jersey is facing a difficult fiscal situation, it is more critical than ever that lawmakers understand exactly how much the state spends through its tax code. Although this bill won’t solve the state’s budget problems, it is bound to lead to better choices, more appropriate spending and more accountability.”

“The problem with these tax expenditures is that once they are enacted, they rarely get reviewed,” NJPP Policy Analyst Naomi Bressler said. “And unfortunately, programs that are not scrutinized have the potential to crowd out other important programs. We can’t continue to allow this hidden spending to continue to go unchecked. After all, every dollar the state doesn’t collect is a dollar that must be raised by increasing an existing tax or providing fewer services.”

Most taxpayers benefit from some form of a tax expenditure. For example, some major corporations receive tax expenditures in the form of corporate tax breaks. At the same time, the state’s low- and middle-income residents receive a tax expenditure in the form of a state sales tax exemption on food, clothing and prescription medicine.

The legislation moves to the full Assembly for a floor vote on Thursday.

– TOM HESTER SR., NEWJERSEYNEWSROOM.COM