The state in the current biennium budget period gave out 176 tax breaks for B&O taxes totaling some $7.5 billion while collecting only $6.5 billion in revenue. The exemptions were 54% of the potential tax base.
When an exemption is given it means that a tax shift occurs so the responsibility falls on someone else. In the same 2011-2013 biennial budget, when you add the public utility tax, retail sales/use tax and real estate excise tax to the B&O taxes referenced above, the state projected some $22.78 billion in revenues, while exempting some $21.16 billion. The exemptions as a percent of the tax base was 48.2%. Basically for every dollar raised, a dollar was not collected.
One problem is that there is heavy scrutiny of every dollar raised as to how it is spent as part of the state budget. Unfortunately the other dollar that was not collected but listed as a tax expenditure is off budget spending and has not been subject to rigorous evaluation as to whether it is a dollar wisely spent. When the dollars add up to some $20 billion it is now a huge problem.