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Are Tax Credits Effective?

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Every year in Arizona, millions of dollars that would have gone to the state’s bottom line are spent elsewhere without annual oversight or performance review. Specifically, more than $300 million is automatically allocated to select beneficiaries each year through state tax credits with virtually no accountability to taxpayers.

Last week, the Joint Legislative Income Tax Credit Review Committee of the state legislature met and reviewed nine tax credits. Three of those were reviewed behind closed doors with no public information. None of those tax credits have reported performance measures for lawmakers to analyze or discuss.

For example, data show that tax credit funding for private schools grew 128% per student between 2000 and 2010. But during that same time, total state appropriations for public schools grew less than 1% per student (adjusted for inflation). These types of trends need to be discussed and considered by the legislature. Is this an effective use of our limited resources?

We need more transparency and a full public debate and vote on the value of each tax credit. The state budget is voted on every year. State agencies and programs have automatic sunset reviews every five or ten years. Tax credits, however, only get a minimal committee review every few years with no vote by the full legislature.

Read the Statement on Tax Credit Review from Dana Wolfe Naimark, President and CEO, Children’s Action Alliance: Tax Credits Need More Accountability.

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