Tax expenditures result in very large revenue losses to the state. Over the years, Rhode Island has given up billions of dollars in potential tax revenue through tax expenditures. Every other year, the Rhode Island Department of Revenue publishes a Tax Expenditures Report detailing the more than two hundred tax expenditures and their annual costs. The most recent report, issued in 2010, using 2008 tax data, found that tax expenditures cost the state at least $1.67 billion in lost revenue in 2008.
As the state struggles to close a nearly $300 million budget gap and ensure that future budgets can be balanced without sacrificing the services that are necessary for the health of our people and our economy, it is critical that tax expenditures be subject to the same scrutiny as direct spending and become a part of the yearly budget process.
This issue brief analyzes the 2010 Tax Expenditure Report and proposes several steps that policy makers should take to ensure that these $1.67 billion dollars are no longer the “hidden spending” of the state’s budget.