Rethinking state tax expenditure budgets

The tax expenditure concept has generated extraordinary insights into the taxing and spending processes. The concept has provided a powerful analytical tool, although regrettably policymakers often have been drawn into needless definitional battles. At least nineteen states have embraced the concept by compiling a tax expenditure budget. A state tax expenditure budget can serve to highlight and publicize defects in the tax system. The next step, either independent of or in conjunction with such a budget, is for a state to apply a tax expenditure analysis to a manageable number of carefully selected provisions.