As much as a quarter of the benefits of state tax incentives are lost in the form of higher federal tax payments. The cost of tax incentives relative to their benefits is relatively high due to leakage and the fact that persons who would have done the same thing in the absence of the incentive often claim tax credits. The benefits of rebate and discount programs are available immediately, whereas the benefits of tax incentives are not realized until a taxpayer files their tax return in the following year. These same families are suffering the greatest burdens from rising energy prices. Direct rebate, service, and discount programs, on the other hand, can be targeted to those most in need of assistance.
Most tax incentives are available to anyone who engages in the activity that is incentivized.
Consequently, costs are open-ended and unpredictable. Direct expenditure programs, including rebate and assistance programs, can be capped resulting in costs that are predictable and controllable. The Legislature should act cautiously. The state has an existing infrastructure of energy conservation and assistance programs. Conservation programs currently offered through utility companies.