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FREE CONSULTATION818-436-2775
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Calculating the Cost of Tax Respite Programs

 

calculating tax respite The Governmental Accounting Standards Board (GASB) of the United States has the responsibility of establishing and overseeing the accounting guidelines used in the public sector. This Accounting Board recently made an announcement that will be closely followed by each tax accountant Los Angeles firm concerning a proposal that state and local governments must disclose the amount of revenue that could be lost as a result of tax breaks given for economic development projects.

 

The disclosures are to include descriptions of the tax abatement programs, including many programs that are already established. The information will then be used to determine whether or not a tax payer could qualify for the tax respite programs. It could also be used to decide the amount of dollars involved in the tax breaks.

 

What Is the Purpose of These Tax Breaks?

Many tax respite programs are created as incentives to businesses to hire from within their own communities. The breaks are often used to bring economic development into communities that have struggled due to recession difficulties. However, with changes outlined in the proposal, governments will have to carefully weigh the financial impact that these tax breaks could have. Calculating the cost and determining the nature of the effects may be difficult, however. A private or government tax accountant Los Angeles firm will need to consider many aspects of each program.

 

Correlating Studies May Show the Reasoning Behind the Proposal

Although the idea that “tax cuts spur growth” has been accepted for some time, there are many reasons for each tax accountant Los Angeles firm to question this acceptance. The amount of money spent by states (through tax credits, exemptions, and incentives) to strengthen businesses in their communities should deliver a return in a stronger economy. However, research conducted by Pew shows that many lawmakers don’t know how effective those incentives will be when they approve the tax break programs.

 

This proposal by the US Accounting Board could simply be a way to get state and local government leaders to research the effects of tax respite programs before approving them. This step could prevent unexpected budget shortfalls, force a focus on effective incentive programs, and eliminate those programs that are not effective.