Connecticut Making Progress On Evaluating Tax Incentives, But Misses Top Ranking

May 4, 2017

Economic incentives like loans and tax breaks for companies have been a controversial subject in recent years. And now a new study shows Connecticut doesn’t follow national best practices in monitoring the effects of its own generosity. 

Everyone does it: all states give away taxpayer money to businesses and corporations to keep them from leaving, or to incentivize them to add jobs and make new investments.

In fact, research shows that incentives of this type cost U.S. taxpayers a collective $40 billion a year.

But what counts, according to the Pew Charitable Trusts, is the bang you get for your buck. In its latest report, Pew picks out ten states, including Maine, Maryland, and Florida, that lead the way in monitoring the effects of their tax incentives, and in turn using that data to improve their programs.

Connecticut is not in that top rank. Instead, it’s among 18 states that are termed as “making progress.”

The state Department of Economic and Community Development does regular in-house analysis of the incentive programs it administers, like the First Five companies.

But Josh Goodman of Pew said it would be better to hand that responsibility over to an independent agency.

"In practice, the most common approach has been legislative program evaluation offices or audit offices," he said. "And the strength of those offices is they do have that independent perspective. They’re non-partisan. It’s very standard for them to be forthright about whether government programs are working or not, and they have the expertise to do that."

Pew’s report also chides Connecticut for failing to link its evaluations to improvements in policy.

"Connecticut was one of the first states to begin producing regular evaluations that rigorously measured the economic impact of tax incentives. However, the studies have had little effect on incentive policy, in part because the state’s approach lacks a strong connection between the evaluations and the policymaking process," said the report.

Outside audit of the type recommended was mandated by a bill that passed the legislature last session. But the legislation was vetoed by Governor Dannel Malloy.

A similar bill has been voted out of committee this year, and awaits action by the full House and Senate.