Requires governor to perform a cost benefit analysis of tax expenditures.
TITLE OF BILL: An act to amend the executive law, in relation to cost benefit analysis of tax expenditures
PURPOSE: This legislation proposes to require the Governor to provide in the annual Tax Expenditure Report more information -- including cost/benefit analyses that better gauges the effectiveness and efficiency of each tax expenditure.
SUMMARY OF PROVISIONS:
§ 1. Amends subdivision 1 of section 181 of the Executive Law to include the following definitions:
1. "Cost benefit analysis" 2. "Cost benefit analysis ratio" 3. "Cost benefit analysis target ratio"
§ 2. Amends subdivision 2 of section 181 of the Executive Law to include:
1. A cost/benefit analysis of each tax expenditure;
2. A comparison between each tax expenditures cost benefit analysis ratio and the tax expenditure's target ratio, along with an explanation for any difference between the two ratios.
3. An analysis of whether each tax expenditure has successfully achieved the purpose for which the tax expenditure was enacted and currently serves, including an analysis of the persons or entities that are benefited by the tax expenditure.
4. An explanation of the cost benefit analysis formula applied to each tax expenditure.
5. An explanation of each tax expenditure's target ratio, including a description of why the ratio reflects adequate levels of tax relief or job creation or job retention or investment in the State.
§ 3. Amends subdivision 3 of Section 181 of the Executive Law to include the following:
1. The Governor shall develop for each tax expenditure a cost benefit analysis formula for determining the cost benefit analyses ratio.
2. The Governor shall set for each tax expenditure a cost benefit analysis target ratio.
Section 181 of the Executive Law requires the Governor to submit to the Legislature an annual Tax Expenditure Report no more than thirty days after issuing the Executive Budget. The report shall contain information and statements on the provisions of law authorizing the tax expenditures and cost estimates on them. It shall also include any recommendations of the Governor regarding continuing, modifying, or repealing tax expenditures.
In cases when the Executive Budget includes proposals to expire, modify or repeal a tax expenditure, the report shall contain an analysis of the number and types of persons and entities benefiting or expected to benefit from such tax expenditures, an estimate of the costs of such tax expenditures for the coming fiscal year, and an explanation of the reasons for the proposals. The explanation of recommendations shall include comments on the effectiveness and efficiency of tax expenditures plus general cautionary and advisory notes concerning limitations of data, estimation procedures, sampling errors and imputed values.
JUSTIFICATION: New York State has over 484 tax expenditures, some of which date back to the 1890s. While the Governor's Tax Expenditure Report annually reviews each tax expenditure's amount of reduced taxpayer liability to the State, many of them have remained in law with little consideration as to whether they are fulfilling their objectives to benefit the public.
More than twenty years have passed since the Governor issued his first Tax Expenditure Report in 1990. Yet New York still needs a more rigorous tax expenditure review process. This review should employ performance metrics which weighs economic activity against tax assistance. Cost/benefit analyses on all tax expenditures would give legislators a clearer understanding of the need to maintain, enhance or sunset them. The Governor is already required to comment on a tax expenditure's effectiveness and efficiency, but primarily when recommending to expire, modify or repeal it.
PRIOR LEGISLATIVE HISTORY: S408 2011 New Bill - died in Finance Committee S408 2012 -died in Rules Committee
FISCAL IMPLICATIONS: Slightly higher administrative costs stemming from requirements on the Executive to perform tax expenditure cost/benefit analyses. Potential cost savings through changes to inefficient tax expenditures.
EFFECTIVE DATE: This act shall take effect on the first of January next succeeding the date it shall have become law.
STATE OF NEW YORK ________________________________________________________________________ 7083 IN SENATE April 24, 2014 ___________Introduced by Sen. KRUEGER -- read twice and ordered printed, and when printed to be committed to the Committee on Finance AN ACT to amend the executive law, in relation to cost benefit analysis of tax expenditures THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. Subdivision 1 of section 181 of the executive law is amended by adding three new paragraphs (c), (d) and (e) to read as follows: (C) "COST BENEFIT ANALYSIS" SHALL MEAN, FOR TAX EXPENDITURES CLAIMED BY TAXPAYERS SUBJECT TO ARTICLES NINE (OTHER THAN SECTION ONE HUNDRED EIGHTY), NINE-A, THIRTEEN-A, TWENTY-EIGHT, THIRTY-TWO, AND THIRTY-THREE OF THE TAX LAW, A METHOD OF DETERMINING A TAX EXPENDITURE'S BENEFIT TO NEW YORK STATE BASED ON THE TAX EXPENDITURE RECIPIENT'S PROJECTED JOB CREATION OR JOB RETENTION AND/OR INVESTMENT IN THE STATE VERSUS THE TOTAL AMOUNT OF REVENUES FOREGONE UNDER THE TAX EXPENDITURE. FOR TAX EXPENDITURES CLAIMED BY TAXPAYERS SUBJECT TO ARTICLES TWENTY-TWO AND THIRTY-ONE OF THE TAX LAW, "COST BENEFIT ANALYSIS" SHALL MEAN A METHOD OF DETERMINING A TAX EXPENDITURE'S BENEFIT TO NEW YORK STATE BASED ON THE AMOUNT OF TAX RELIEF A TAX EXPENDITURE PROVIDES TO PARTICULAR CLASS- ES OF PERSONS OR ENTITIES. (D) "COST BENEFIT ANALYSIS RATIO" SHALL MEAN THE RATIO CALCULATED BY A COST BENEFIT ANALYSIS OF A TAX EXPENDITURE. (E) "COST BENEFIT ANALYSIS TARGET RATIO" SHALL MEAN THE COST BENEFIT ANALYSIS RATIO LEVEL THAT THE GOVERNOR DEEMS TO REFLECT A TAX EXPENDI- TURE'S ADEQUATE LEVEL OF BENEFIT TO NEW YORK STATE WHEN TAKING INTO CONSIDERATION THE AMOUNT OF REVENUES THE STATE FOREGOES BECAUSE OF A TAX EXPENDITURE AND THE AMOUNT OF TAX RELIEF OR JOB CREATION OR JOB RETENTION OR INVESTMENT IN THE STATE PROVIDED OR SUPPORT BY THE TAX EXPENDITURE. S 2. Paragraphs (f) and (g) of subdivision 2 of section 181 of the executive law, as added by chapter 23 of the laws of 1990, are amended and five new paragraphs (h), (i), (j), (k) and (l) are added to read as follows:EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD01248-01-3 S. 7083 2
(f) comment, if any, on the effectiveness and efficiency of other tax expenditures;
[and](g) general cautionary and advisory notes concerning limitations of data, estimation procedures, sampling errors and imputed values, promi- nently displayed [.]; AND (H) A COST BENEFIT ANALYSIS OF EACH TAX EXPENDITURE; (I) A COMPARISON BETWEEN EACH TAX EXPENDITURE'S COST BENEFIT ANALYSIS RATIO AND THE TAX EXPENDITURE'S TARGET RATIO, ALONG WITH AN EXPLANATION FOR ANY DIFFERENCE BETWEEN THE TWO RATIOS; (J) AN ANALYSIS OF WHETHER EACH TAX EXPENDITURE HAS SUCCESSFULLY ACHIEVED THE PURPOSE FOR WHICH THE TAX EXPENDITURE WAS ENACTED AND CURRENTLY SERVES, INCLUDING AN ANALYSIS OF THE PERSONS OR ENTITIES THAT ARE BENEFITED BY THE TAX EXPENDITURE; (K) AN EXPLANATION OF THE COST BENEFIT ANALYSIS FORMULA APPLIED TO EACH TAX EXPENDITURE; AND (L) AN EXPLANATION OF EACH TAX EXPENDITURE'S TARGET RATIO, INCLUDING A DESCRIPTION OF WHY THE RATIO REFLECTS ADEQUATE LEVELS OF TAX RELIEF OR JOB CREATION OR JOB RETENTION OR INVESTMENT IN THE STATE. S 3. Subdivision 3 of section 181 of the executive law is renumbered subdivision 5 and two new subdivisions 3 and 4 are added to read as follows: 3. COST BENEFIT ANALYSIS FORMULA. THE GOVERNOR SHALL DEVELOP FOR EACH TAX EXPENDITURE A COST BENEFIT ANALYSIS FORMULA FOR DETERMINING THE COST BENEFIT ANALYSIS RATIO. 4. COST BENEFIT ANALYSIS TARGET RATIO. THE GOVERNOR SHALL DETERMINE FOR EACH TAX EXPENDITURE A COST BENEFIT ANALYSIS TARGET RATIO. S 4. This act shall take effect on the first of January next succeed- ing the date on which it shall have become a law.