House and Senate bills that mandate evaluations of the return Mississippi gets on its tax credits, sales tax rebates and other economic development incentives have passed their respective bodies unanimously and now await conference committee action.
The idea is to gauge how well they create jobs and other economic benefits in exchange for the costs to the state.
Sen. David Blount’s SB2640 and Rep. Brad Mayor’s HB1365 would broaden Mississippi’s current practice of evaluating the effectiveness of individually selected projects that receive tax and other incentives.
SB 2640 and also HB1365 require the Mississippi Development Authority, the state’s economic development entity, to file an annual report on tax credits, loans and grants made for economic development projects. The executive director of the MDA must judge whether the statutory and programmatic goals of the tax benefit are being met, with obstacles to those goals identified, if possible, according to the bills.
The Senate bill, which has been referred to the House Ways & Means Committee, and House bill, which has been referred to the Senate’s Accountability, Efficiency and Transparency Committee, are designed to provide a systematic approach for evaluating whether incentives are fulfilling their intended purposes in a cost-effective manner. The bills specify that an analysis of economic development tax incentives and economic development programs enacted before July 1, 2014 must be completed by state economists at least once between July 1, 2015 and June 30, 2018 and no less than once every three years thereafter.
An analysis of any economic development tax incentives and economic development programs created after July 1, 2014 must be completed within five years of taking effect, and no less than once every three years thereafter, according to the bills.
The analysis of tax incentives must include:
» A baseline assessment of the tax incentive, including, if applicable, the number of aggregate jobs associated with the taxpayers receiving such tax incentive and the aggregate annual revenue that such taxpayers generate for the state through the direct taxes applied to them and through taxes applied to their employees;
» The statutory and programmatic goals and intent of the tax incentive, if the goals and intentions are included in the incentive’s enabling legislation;
» The number of taxpayers granted the tax incentive during the previous twelve-month period;
» The value of the tax incentive granted, and ultimately claimed, listed by the North American Industrial Classification System (NAICS) Code associated with the taxpayers receiving the benefit, if the NAICS Code is available;
» An assessment and five-year projection of the potential impact on the state’s revenue stream from carry-forwards allowed under the tax incentive.
The assessment conducted by state economists must include a cost-benefit comparison of the revenue foregone by allowing the tax incentive compared to tax revenue generated by the taxpayer receiving the credit, including direct taxes applied to them and taxes applied to their employees.
The evaluations would come under the University Research Center whose staff includes state economists who would do the actual work.
Legislators were prepared to pass a similar bill introduced by Blount last year but held back at the request of the MDA. The agency wanted to ensure that the proprietary information it would be forwarding to state economists would remain confidential.
Mayo said drafters this year resolved the confidentiality issue through a provision by which the University Research Center will sign the same confidentiality agreement the MDA has with the state Department of Revenue. “We just mirrored that language and applied it to the IHL economists,” Mayo said.