Initiative 636 – the Tax Exemption Transparency and Accountability Act has received a ballot title from the Washington State Attorney General. According to Washington State’s Department of Revenue’s figures, tax expenditures account for as much spending as the state spends in its general operating budget every 2 years.
Washington State’s tax structure is broken. Not only do we have the distinction of having the most regressive tax system in the nation, we also have an out of control tax exemption system that is unfair.
According to the Washington State Department of Revenue, we have a tax system that results in exempting many business, special interests and others from paying half the base taxes that are levied if everyone paid the same. For example in the last biennium the state collected from B&O taxes on businesses about $6.5 billion. At the same time they exempted through tax preferences, tax exemptions, tax deductions and tax exclusions some $7.5 billion in B&O taxes.
Washington State currently has over 650 tax exemptions on the books. Only about 10% of them have sunset provisions. These exemptions are more accurately called tax expenditures because they represent money the state is spending. The problem is that they lack the accountability and transparency that other expenditures by the state go through in the normal budget process.
Every two years the state prepares a omnibus operating appropriations budget. Tax expenditures are not included in this budget but are off budget spending by the Legislature. This needs to end.
To increase transparency and accountability, Tax Sanity proposes that all discretionary tax expenditures be part of a Tax Expenditure Budget that the Legislature must adopt every two years as part of the biennial omnibus operating appropriations act.
The citizens group Tax Sanity has been writing drafts of proposed legislation to create a Tax Expenditure Budget. Initiative 626 is the latest draft. While they hope the Washington State Legislature will act to reform the current runaway tax exemption system that is full of tax loopholes that don’t benefit the state, they are not optimistic that the Legislature will adopt the needed changes. So they have also been filing their proposed legislation as initiative drafts for feedback and discussion. They recently received the following ballot title and summary.
Initiative Measure No. 636 concerns taxes.
This measure would require new and existing discretionary tax preferences to be authorized every two years in a tax expenditure budget, which would detail the revenue impact, purpose, and effectiveness of each preference.
Should this measure be enacted into law? Yes [ ] No [ ]
Ballot Measure Summary
This measure would require each state biennial omnibus operating appropriations act to include a tax expenditure budget to approve new and existing discretionary tax preferences, including exemptions, deductions, credits, and deferrals. 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.
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It is too late in the year to collect signatures on this measure so Tax Sanity will be trying to get the Legislature to adopt this bill. Unfortunately with the State Senate being in the hands of the Republicans who have opposed dealing with most tax exemption reforms it will be a long shot on their passing legislation. So it is likely that Tax Sanity and concerned citizens will have to eventually go the initiative route for reform.
You can view Tax Sanity’s website at www.taxsanity.org. They also have a facebook page entitled Tax Sanity. You can contact them at email@example.com if you want to be keep informed of their efforts or want to help move this proposal forward.