Over the past 50 years, Maine legislatures and governors have added millions of dollars in tax breaks for businesses without ever doing a detailed analysis of which are effective and which are wasteful.

That may be changing. A growing list of legislators have called for a review of programs that leading economists have panned for not delivering on promises to create jobs.

“We put a lot of stock in these programs, but we never go back to see if they work,” Sen. Emily Cain, D-Orono, told the Legislature’s Taxation Committee last week.

Tax expenditure programs are defined as any loss of state tax revenue “that allows a special exclusion, exemption or deduction or provides a special credit, a preferential rate of tax or a deferral of tax liability.”

Cain has proposed a bill, LD 1488, that would require the tax committee to recommend which programs should be kept, repealed or changed. The Legislature would then have to hold an up-or-down vote on them as part of the budget approval.

Another bill — LD 317 — calls for research on whether the $50 million property tax break for business equipment known as BETR is meeting its goals; LD 1255 seeks an “independent academic policy analysis” of tax breaks; and LD 1463 wants to determine “the best way to achieve the goals of tax expenditures in the most effective and efficient manner possible and to ensure transparency and accountability.”

Rep. Peggy Rotundo, DLewiston, a longtime member of the Appropriation Committee, said “we pore over every expenditure, no matter how small it is.” But millions in tax breaks “receive no oversight from the committee … and we owe that to the people of the state of Maine.”

Currently, while lawmakers get the list of programs each budget year, the annual cost of each is never voted on. Instead, programs live on, new ones are created and old ones rarely, if ever, are repealed.

Taxation Committee Cochairman Rep. Adam Goode, D-Bangor, calls this $504 million annual cost “a secret budget.”

Tax expenditure programs range from breaks for businesses to loopholes for special interests to exemptions designed to help worthy causes. For example:

— A sales tax exemption for fuel and power for businesses costs about $24 million per year

— A sales tax exemption for school meals represents lost taxes of $10.8 million

— Businesses in Pine Tree Enterprise Zones get income tax reductions that cost $3.3 million each year.

— Retired military dentists get a tax deduction on their pensions in order to encourage them to practice in Maine, a cost of about $50,000 annually.

The annual tax expenditure list compiled by the Maine Revenue Services is 213 pages long. The printed version comes with a red cover that is often waved at tax committee hearings as an example of the complexity of the problem.

The question, “Which one would you kill?” is asked repeatedly during committee hearings.

“That question is too broad because we don’t have the data,” Cain said. “It drives me crazy … because it can’t be answered except with anecdotes.”

Existing studies — nationally and in Maine — have not provided legislators the level of detail they say they need to determine which programs meet goals such as job creation.

If they had that data, they say, they could vote to keep, kill or even expand programs.

“After interviewing hundreds of policymakers, agency officials and experts, and reading over 600 documents, the overall picture is that lawmakers frequently rely on incomplete, conflicting or anecdotal information when they make decisions about tax incentives,” said Jeff Chapman, manager of a nonpartisan Pew Charitable Trusts evaluation of state tax incentives for jobs and growth.

Pew rated states on how well they are measuring business attraction programs. Thirteen states rated “leading the way,” 12 got “mixed results” and 26 were “trailing behind,” among them Maine.

At a 2009 Federal Reserve Bank of Boston panel, Peter Enrich of Northeastern University summarized that research on the issue should lead government to “just say no” because there is no assurance the programs create jobs.

To date, the most thorough study of Maine’s programs was the 2006 audit by the state Office of Program Evaluation and Government Accountability.

In a study of 46 business incentives designed to promote job growth, OPEGA designated a dozen as “high risk.” Among the problems were inadequate performance measures, costly duplications and a lack of independent reviews that could cause “mismanagement and fraud to go undetected.”

Those dozen programs alone cost the state $100 million annually.

An analysis of Pine Tree Zones by the Maine Center for Public Interest Reporting last year discovered that companies receiving the tax breaks never showed they needed them in order to create jobs, as the law says they must to qualify.

The most high-profile attempt to reduce the state’s spending on tax expenditures is embedded in the “Act to Modernize and Simplify the Tax Code” bill that provoked a day’s worth of testimony last Friday.

The bill eliminates a range of tax breaks, including nearly every sales tax exemption and some highly-favored business incentives such as Pine Tree Zones and the New Markets tax credit, which costs the state $5 million.

The bill is still at the concept stage and does not have a full fiscal analysis, but the business programs it would phase out have already been documented to cost many millions.

Sen. Richard Woodbury, the independent from Cumberland and an economist, is among the 11 legislators who wrote the bill. The others include five from both parties.

“We are trying to eliminate as many expenditures as can be sensibly done,” Woodbury said.

Dana Connors, president of the Maine State Chamber of Commerce, said he likes the comprehensive and bipartisan aspects of the bills, but opposes it for a lack of specifics and the short time to deal with it.

He also said he had concerns about the loss of the business tax incentives.

“Our programs in Maine are modest when it comes to attracting economic development and business” when compared to other states, he said. “I’m concerned if all of that was removed from our books. That would create a problem for us.”

As of Tuesday, none of the bills had been voted on by the full Legislature. The tax committee on Monday voted against all the bills but Rotundo’s “best practices” bill, LD 1463, which has bipartisan cosponsors.

Goode, the committee’s House chairman, said the committee felt Rotundo’s bill came closest to requiring both a detailed analysis and legislative review.

He said a bill is needed that will change the way he fears decisions about tax policies are made now — “either by what makes someone feel good or who has the most people at the public hearing.”

THE MAINE CENTER for Public Interest Reporting is a nonprofit, nonpartisan news service based in Hallowell.

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