NPI's Cascadia Advocate

Offering commentary and analysis from Washington, Oregon, and Idaho, The Cascadia Advocate is the Northwest Progressive Institute's unconventional perspective on world, national, and local politics.

Saturday, January 21st, 2017

Progressive Ideas We Need: Biennial budgets that record tax breaks as state expenditures

Editor’s Note: Today and through­out this week­end, NPI is run­ning a spe­cial series here on the Cas­ca­dia Advo­cate called Pro­gres­sive Ideas We Need, high­light­ing pro­pos­als that would raise qual­i­ty of life in our region and in the Unit­ed States as a whole. Each post is con­tributed by an NPI staff, board, or advi­so­ry coun­cil mem­ber.

We may not be used to think­ing of them this way, but the truth is that tax exemp­tions, pref­er­ences, deduc­tions, cred­its and defer­rals are off-bud­get expen­di­tures. They lack the account­abil­i­ty and trans­paren­cy that exists for oth­er expen­di­tures the state makes as part of the bien­ni­al bud­get process.

Tax­pay­ers deserve to know who is receiv­ing these tax breaks, how much mon­ey is involved, and for what rea­son they are giv­en.

Accord­ing to the Wash­ing­ton State Depart­ment of Revenue’s 2016 Tax Exemp­tion Study, while the State expects to col­lect some $7.4 bil­lion in busi­ness and occu­pa­tion (B&O) tax rev­enue in the cur­rent 2015 ‑2017 bien­ni­um, it exempts from col­lec­tion some $11.4 bil­lion. When sales and use tax­es were includ­ed with the analy­sis, the results are sim­i­lar – the state expects to col­lect some $18.9 bil­lion in rev­enue while exempt­ing some $16.9 bil­lion in rev­enue

Wash­ing­ton State has cre­at­ed some 694 tax exemp­tions over the years. Over 450 of these are dis­cre­tionary tax exemp­tions, not required by Fed­er­al or State con­sti­tu­tion­al law. These dis­cre­tionary tax exemp­tions will account for over $28.3 bil­lion in B&O and sales/use tax rev­enue not col­lect­ed in the cur­rent bien­ni­um.

Includ­ing prop­er­ty tax exemp­tions the 2016 Depart­ment of Rev­enue Report projects that in total, Wash­ing­ton State will see as off bud­get tax expen­di­tures almost $40 bil­lion in tax exemp­tions this bien­ni­um while only col­lect­ing rev­enues of $32.6 bil­lion for the Leg­is­la­ture to fund its bien­ni­al bud­get. .

HB 1500 intro­duced by Rep­re­sen­ta­tive Ger­ry Pol­let and 32 oth­er State Rep­re­sen­ta­tives would require the gov­er­nor to pro­pose and the state leg­is­la­ture to adopt a tax expen­di­ture bud­get every two years as part of the bien­ni­al omnibus oper­at­ing appro­pri­a­tions act. A com­pan­ion bill is being intro­duced in the State Sen­ate by Sen­a­tor David Frockt with twelve oth­er spon­sors.

HB 1500 would give the Wash­ing­ton State Leg­is­la­ture an oppor­tu­ni­ty to peri­od­i­cal­ly eval­u­ate the need and effec­tive­ness of the state’s tax exemp­tions in meet­ing cur­rent state needs. They would do this at the same time they are mak­ing bud­get deci­sions about pri­or­i­tiz­ing oth­er state expen­di­tures for pub­lic ser­vices as part of the bien­ni­al bud­get appro­pri­a­tions process.

This mea­sure would require new and exist­ing dis­cre­tionary tax pref­er­ences to be autho­rized every two years in a tax expen­di­ture bud­get. It will add much need­ed trans­paren­cy and account­abil­i­ty to the hun­dreds of exemp­tions and pref­er­ences, along with their cost and how each deci­sion to spend mon­ey on an exemp­tion or pref­er­ence is a choice to expend funds for this pur­pose with par­tic­u­lar ben­e­fi­cia­ries.

The tax expen­di­ture bud­get would detail the fis­cal impact, pur­pose, and effec­tive­ness in meet­ing the pur­pose of each tax pref­er­ence.

Tax pref­er­ences not includ­ed in the tax expen­di­ture bud­get would expire at the end of the cal­en­dar year in which the bud­get is adopt­ed.

Please con­tact your leg­is­la­tors today and urge them to sup­port the Tax Exemp­tion Trans­paren­cy and Account­abil­i­ty Act.

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