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Editorial: Cutting fat out of tax incentives

But are taxpayers getting our money’s worth? Or are we just padding the profits of companies that have learned to hold us over the tax incentive barrel?

An important initiative in Ohio, just getting underway, is aimed at providing answers to that question.

Tax credits for businesses fall into two general categories. First is that seen most often at the local level, where there are no promises made and no strings attached. Here in West Virginia, use of tax increment financing is popular. In effect, it gives businesses breaks on future property taxes in the realization that their projects result in higher tax collections — which would not occur without the developments.

Most of the time in such situations, no one promises anything in exchange for the breaks. It is enough for local officials to know granting them will expand the economy and create new jobs.

State governments sometimes grant special-purpose tax incentives. They can come in the form of income tax credits or deductions, even exemptions from certain taxes. Often, beneficiaries promise to create a certain number of new jobs. Not infrequently, follow-up discloses the companies did not keep their promises.

Ohio legislators agreed in December to establish a special Tax Expenditure Review Committee to look into incentives. Lawmakers have good reason to investigate the issue. By one estimate, various tax credits, deductions and exemptions cost the state as much as $9 billion a year.

That is a sizable amount of revenue. Giving those kinds of breaks to some businesses means others, along with Buckeye State residents, have to pay higher taxes.

Finally this week, state Senate and House of Representatives leaders appointed people to the committee. Obviously, for one reason or another, the folks at the Statehouse are in no hurry to get to the bottom of the tax incentives issue.

Committee members should buckle down and get to work. What they learn — assuming their conclusions are not politically whitewashed — will be of benefit not just in Columbus but in state capitals throughout the nation.

It is impossible to believe that in $9 billion worth of incentives a year, there is not room to cut some — and lessen the burden on other taxpayers.

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