Kentucky Center for Economic Policy: Reforms Needed to Bring Greater Scrutiny to “Tax Expenditures”

Every year Kentucky loses billions of dollars in revenue through special tax preferences and breaks for individuals and businesses that are written into the tax code. Yet there is very little understanding or awareness of these provisions, which are known as tax expenditures, and almost no review and assessment of their effectiveness. Tax expenditures receive far less scrutiny than spending in the state budget, and once put into the tax code tend to stay there. When many vital state services are being reduced in tough economic times, as is the case today, tax expenditures tend to escape such cuts. A series of common-sense reforms would shed greater light on the purpose, impact and effectiveness of the state’s tax expenditures and help Kentucky make better choices about key priorities in the future.

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