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.