Tax Sanity has been busy this year filing initiative drafts for proposed legislation to create a tax expenditure budget. The goal is to draft legislation that will increase tax exemption accountability and transparency. Initiative 626 is the latest version to receive a ballot title.
Initiative Measure No. 626 concerns taxes.
This measure would require new and existing discretionary tax preferences to be authorized every two years in a tax expenditure budget and repeal requirements for advisory votes of the people on tax increases.
Should this measure be enacted into law? Yes [ ] No [ ]
Ballot Measure Summary
This measure would require the legislature to approve new and existing discretionary tax preferences every two years, in a tax expenditure budget detailing the fiscal impact and purpose of each tax preference. The tax expenditure budget would be included in the biennial omnibus operating appropriations act. Tax preferences not included in the tax exemption budget would expire at the end of the fiscal year. The measure would repeal requirements for advisory votes on tax increases.
Why is Initiative 626 needed?
Washington state currently has some 650 tax exemptions also frequently called tax preferences which are more accurately called tax expenditures.
Unknown to most Washington state voters is the fact that we exempt about the same amount of revenue from tax collection as we actually collect if all taxpayers were taxed at the same base rate.
For example, The Washington State Department of Revenue in it’s 2012 Tax Exemption Study said that in the last biennium Washington State collected from businesses about $6.5 billion in B&O taxes. However it also stated that it exempted from tax collection some $7.5 billion. This is a broken system when more dollars are exempted from collection than are collected.
Washington State taxpayers have a right to know who is being taxed and who is not being taxed and why. Right now these exemptions represent off budget spending with many benefiting various special interests. Only about 10% of these expenditures have sunset provisions on them. They are not revisited or approved by the Legislature on a biennial basis like other state expenditures are. They lack the transparency and accountability that other state expenditures undergo when the biennial budget is adopted.
Tax Sanity believes this unaccountability is unacceptable and needs to end. This out of control off budget spending in the form of unaccountable tax expenditures needs to end. As noted by the Citizen Commission for Performance Measurement of Tax Preferences that reviews tax preferences and has been doing so for about 7 years, many of these exemptions were passed by previous legislatures with no purpose stated as to what state need they are addressing and most lack clear measurable standards by which to determine whether they are benefiting the state. This needs to change.
State expenditures in the regular budget process meanwhile are required by law to comply with meeting the state priorities of government when the Governor submits his proposed budget to the State legislature for adoption. Tax expenditures undergo no similar evaluation.
Initiative 626’s language would require the Governor to submit and the Legislature to adopt as part of the biennial omnibus operating appropriations act , a tax expenditure budget detailing each of the tax expenditures existing, how much they are costing and their purpose.Tax expenditures required because of the US Constitution or the State Constitution are exempt from being included in the tax expenditure budget.
Because no past Legislature can bind a future Legislature in the actions they take, the final tax expenditure budget adopted can remove, add, or modify the tax expenditure budget to meet the current state needs, priorities and fiscal situation. The proposed legislation as outlined in Initiative 626 does not in its language repeal, modify or add any tax exemptions. That remains the job of our elected Legislators.
Two additional versions have been filed, Initiative 636 and Initiative 638 and are awaiting ballot titles from the Washington State Attorney General. They are initiatives to the legislature but no effort will be made to collect signatures this year as the deadline to file signatures on 2013 initiatives to the legislature is Jan 5, 2014.
Tax Sanity will be urging the Legislature to adopt legislation to create a Tax Expenditure Budget like in I-626, but realizes this is a difficult process when one looks at the Legislature’s past reluctance to reform the tax expenditure process. They in fact adopted 15 new tax exemptions in the last session. Accordingly Tax Sanity will continue to discuss and explore the option of running a statewide initiative in the future as well as work with state legislators to pass legislation to adopt a tax expenditure budget. .