Tax breaks: everyone wants them -- and resents the ones that they don't get.

The Poverty Institute at Rhode Island College's School of Social Work has proposed a beefed-up effort to find out how expensive tax breaks are, who they benefit directly, and how they help the public.

Since 1997, the state Division of Taxation has been issuing little-known summaries, called the annual "Tax Expenditures Report," required by state law accounting for tax breaks and "revenues foregone." The 67-page report issued in January, for example, includes the cost of exemptions to the sales tax: $93 million in uncollected taxes because food purchases aren't taxed; nearly $64 million for clothes; $17 million for medicines.

But the Poverty Institute says the reporting is flawed in a number of ways. Not the least of which is that it only looks at 25 percent of the tax breaks every year, so you have to get four years' worth of reports to get the big picture.

A General Assembly bill sponsored on behalf of the institute would require complete reports every two years, along with tables showing results for a number of past years, estimates of the following year, plus a better description of the types of people who benefit, by income, class or business. But Nancy Gewirtz, the Rhode Island College professor who heads the Poverty Institute, believes the bill is dead for this year.

It's too bad, because more than ever, the state needs to know what lost taxes are costing. For example, this is the final year of a five-year cut in the state income tax. Despite a recession-caused budget crisis, no one is talking about money "lost" to the income tax. The Phoenix estimated it could be as much as $82 million this year (see "Taxing matters," News, January 25).

Actually, one of the shortcomings of the current expenditure reporting system is that while the reports note falling income tax rates, they don't mention the impact of the cuts, and the pending reform bill doesn't seem to address that either.

There is little disagreement that it's important to understand the consequences of what government wonks call "tax policy." Which is why both the liberal Poverty Institute and its opposite number, the business-backed Rhode Island Public Expenditure Council, favor establishing a policy office in the Division of Taxation.

But because of a lack of funds, caused in part by tax breaks, there's no money for that idea this year either.

Issue Date: June 7 - 13, 2002