Comments to House Finance Committee on ESSB 5513 Feb. 22, 2018
Steve Zemke Director – Tax Sanity
Tax Sanity recommends passage of ESSB 5513. Updating the Department of Revenue’s Tax Exemption Report every two years instead of four years is important to have this information available for writing the state’s biennial operating budget. It will help to increase transparency and accountability of tax expenditures.
This bill is in line with the recommendations of the National Conference of State Legislatures which wrote in a 2014 document entitled “Tax Expenditure Budgets and Reports; Best Practices” that:
“To ensure that policymakers and the public have a full understanding of deviations from “normal” tax policy and the impact of those deviations on state revenues, there should be a protocol, codified in statute, which specifies that tax expenditure reports should:
- Be easily accessible and available on-line
- Be completed in time for budget and policy decisions.”
They further outline specifically what should be in the report.
More information is no guarantee, however, that the Legislature or a Governor will be more accountable in using this information for the public welfare and benefit. They also wrote:
“While better tax expenditure budgets and reports are a critical first step, the data in these reports must be reviewed and evaluated in order to produce better public policy making. Here, too, there are some “best practices.”
Tax expenditures should be an integral part of the state’s budgeting process, subject to a comparable regular review and approval process as other expenditures. All tax expenditures should be reviewed regularly …
Evaluations should be based on measurable goals and draw clear conclusions on the effectiveness of the tax expenditures. …
The Governor and appropriate legislative committees should review the reports to determine whether tax expenditures should be continued, modified or eliminated. This should be part of the state’s normal budgeting process.”
This is what was proposed in HB 1500, SB 5513. This substitute bill ESSB 5513 takes another step toward more transparency and accountability but the responsibility remains on the Governor and the Legislature to use this information in its budget deliberations to consider the best use of our state tax revenue in both expenditures in the operating budget and off budget tax expenditures known as tax preferences in this state.
Washington State currently expends more revenue through its tax exemption system that it collects as revenue for the general operating budget. Ninety per cent of the tax exemptions have no sunset provisions. This is a broken system and needs to change.