LETTER SENT in SUPPORT OF AB 2106

June 17, 2004

The Honorable Gil Cedillo, Chair
Committee on Revenue and Taxation
California State Senate
P.O. Box 942848
Sacramento, CA 94248-0001

Re: AB 2106 (Ridley-Thomas)-Support

Dear Senator Cedillo and Members of the Committee:

The League of Women Voters of California is pleased to support AB 2106 (Ridley-Thomas), a bill that would require the Department of Finance to make an annual tax expenditure report to the Legislature with more detailed, useful information than is currently required. The bill also, very importantly, establishes a process for further study and evaluation of selected tax expenditures and requires the budget committee in each house to evaluate their priority compared to all regular state expenditures when considering the annual Budget Act.

The League has long advocated mandatory regular review and justification of tax expenditures by the Legislature. Fairness dictates that tax expenditures should contribute to tax equity, be in the interest of the general public and not just a specific group, and provide social benefits that significantly outweigh the increased burden to others.

Tax expenditures tend to be offered with rosy predictions of the benefits they will produce, but with scant evidence to support those predictions. They are then most often left in place without any real review as to whether they have, in fact, had the promised results. We particularly support the provision in AB 2106 which calls for any new or extended tax expenditure to include a sunset date and evaluation, measurable goals and objectives, and provisions for recapture if any qualifying requirements are not met by the taxpayer.

Tax expenditures, including tax credits and other special tax breaks, reduce revenues the state would otherwise receive. At a time when the proposed budget includes cuts in important public services and still fails to close the structural budget gap, we are surprised at the number of new tax expenditure bills that have been offered. We are concerned that they must be weighed carefully against the social cost of the lost revenues.

We believe it is critical that these measures be carefully reviewed as part of the budget process and believe passage of AB 2106 is an important step toward that end.

Sincerely,

Jacqueline Jacobberger
President, League of Women Voters of California