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    Document Summary
    - Report Published -

    Senate Document No. 4
    PUBLICATION YEAR 2012
    View PDF Version*

    Document Title
    Review of the Effectiveness of Virginia Tax Preferences

    Author
    Joint Legislative Audit and Review Commission

    Enabling Authority
    SJR 21 (Regular Session, 2010)

    Executive Summary
    Senate Joint Resolution 21 (2010) directs JLARC to examine the effectiveness of tax preferences. Virginia tax preferences collectively reduced taxpayers’ liability by approximately $12.5 billion in 2008, which represents nearly 90 percent of the State revenue collected from the tax systems reviewed ($14.3 billion).

    Tax preferences are intended to achieve either tax policy or public policy goals. While altering preferences with tax policy goals would generally have negative effects on the State’s tax systems, changing the retail sales and use tax exemption on services could improve the reliability and equitability of that tax system.

    Among tax preferences with public policy goals, those aimed at providing financial assistance achieve their goals, but some could be more efficiently targeted to their intended beneficiaries.

    The effectiveness of tax preferences designed to promote specific activities appears to be mixed. Land and historic preservation tax credits appear to effectively achieve their goals, while others, such as coal tax credits, do not.

    The State currently lacks a consistent process to evaluate the effectiveness of tax preferences. A joint subcommittee should oversee the evaluation process, with guidance from a technical advisory group and analysis from the Department of Taxation.