State budget cuts ‘ineffective’ tax breaks | New

BOSTON – A controversial grant for filmmakers has been put in place as part of the state budget, even as lawmakers have withdrawn several other tax breaks.

A $ 47.6 billion spending package signed by Gov. Charlie Baker last week repeals three tax credits that a state commission said were not worth their weight in lost revenue.

One of the subsidies removed is a Medical Device User Fee Credit, which reimburses companies for certain fees they pay to the United States Food and Drug Administration.

The tax credit, which costs the state more than $ 600,000 per year, is “claimed by a number of large companies primarily,” the panel found in a report, and there is “no provision. similar tax in neighboring states ”.

“The use of this credit by less than half a dozen large companies is a strong indication that it is irrelevant,” the Tax Expenditure Review Commission report said. “Although its low cost suggests that it could be easily justified, we conclude that the average tax credit is too small to provide a significant incentive to the relatively large businesses that claim it.”

Another disappearing subsidy offers shipowners a dollar-for-dollar compensation for the federal excise tax on ports. It was also reported by the repeal commission.

“We conclude that while this credit provides an incentive to use Massachusetts ports, we find that it has no measurable benefit and is irrelevant today,” the report’s authors wrote.

A five-year tax exemption on income from the sale or transfer of energy conservation patents has also been removed. The panel noted that it was so tightly structured that “no one has ever used it”.

The commission of state officials, lawmakers and tax experts examined nearly a dozen tax credits, deductions and exemptions available to companies doing business in Massachusetts.

Greg Sullivan, commissioner and senior analyst at the Pioneer Institute, praised lawmakers for moving quickly to eliminate subsidies.

“When tax relief becomes law, sometimes it actually becomes permanent because it is not subject to review,” he said. “A lot of these tax credits are aimed at job creation and economic growth, but we need to make sure those benefits match the costs. “

True, the tax commission advised lawmakers to remove the film tax credit, which was due to expire in 2023. Instead, the legislature made it permanent and changed the eligibility criteria.

The program provides refundable tax credits equivalent to 25% of the production costs of feature films, television shows, documentaries and commercials shot in the state.

Critics call it a giveaway to Hollywood studios while supporters say it boosts a small but thriving film industry that creates jobs and contributes to the state’s economy revenue.

The tax group also questioned a sales tax exemption on alcoholic beverages, which it said has cost the state up to $ 130 million a year in lost revenue.

He pointed out that alcoholic beverages are not subject to the state’s 6.25% sales tax and are taxed at a lower rate than other retail products at a similar price.

“There is more state tax paid on a taxable grocery cart, containing items such as paper towels and toothpaste, than on an equal retail bottle of alcohol,” the report notes.

Lawmakers whose districts are close to the New Hampshire border have long lobbied to lift the alcohol sales tax altogether, to make the state’s liquor stores more competitive. Despite this, the legislature took no action on the commission’s suggestion.

Sullivan said the recommendations are only the first installment of tax credit reviews. The commission hired consultants to look at other tax breaks.

“It is a healthy exercise for any state to frequently review these tax expenditures,” he said. “We have to make sure we get our money’s worth.”

Christian M. Wade covers the Massachusetts Statehouse for newspapers and the North of Boston Media Group websites.

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About Christopher Easley

Christopher Easley

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