New rule gives taxpayers and policymakers a leg up
For years, taxpayers were in the dark about how much money their state and local governments lost by giving economic development tax breaks to businesses. But the Governmental Accounting Standards Board has issued new rules that will shine a light on the situation. Under GASB 77, as the rule is called, states and localities will be required to report the annual cost of subsidies such as corporate income tax credits, property tax reductions and sales tax exemptions.
“This is a victory for the thousands of taxpayers, grass-roots groups and public officials who have for so long demanded these tax breaks be more transparent and accountable,” said Good Jobs First executive director Greg LeRoy, who spoke with members of the AFT Public Employees program and policy council at its October meeting in Washington, D.C. “States and cities spend an estimated $70 billion a year for economic development, most of it through tax expenditures. But we could only estimate because GASB has never before called for standardized reporting,” explained LeRoy. “That’s the historic value of this new standard: Taxpayers and policymakers will finally see the true price tag for economic development.”
“Given that states already publish tax expenditure budgets that often include this data, the new standard will have the greatest impact on local bodies of government: cities, counties, townships and school boards,” said LeRoy. “We are especially pleased that GASB is calling for public bodies that lose revenue passively due to the actions of other bodies to report such losses. This means school boards will finally have to own up to the huge costs they suffer when cities and counties abate or divert property and sales taxes.”
The AFT provided written comments on the rule. The final version applies to budgets that begin after Dec. 15. The new data will be available in 2017.