Preparing Local Tax Expenditure Reports: A Practical Guide for Local Governments

Tax expenditures are provisions in the tax code that allow for special treatment of some properties or a certain type of expense when computing the tax liability. Policymakers use tax expenditures as incentives for economic development or to provide tax relief to taxpayers, among many other reasons. A local tax expenditure report improves fiscal transparency by allowing local governments and policymakers to better understand the localized revenue effects of these tax provisions and to consider them during the budget-making process. The aim of this “how to” document is to assist local governments who choose to prepare a tax expenditure report themselves by providing them the practical resources and example methods to begin the process. Therefore, this document gives a general overview and theoretical background for preparing a local tax expenditure report with specific and practical examples drawn from the preparation of a local tax expenditure report for Fulton County, Georgia.