Requires governor to perform cost benefit analysis of tax expenditures

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.

Existing law

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.