Tax Sanity is working for progressive tax reform and closing tax loopholes in Washington State. We support increased tax exemption transparency and accountability through the requirement that a tax expenditure budget be passed as part of the biennial budget appropriations process in Washington State.
HB 1500/SB 5513 – the Tax Exemption Transparency and Accountability was re-introduced in the 2017/2018 session of the Washington State Legislature with 33 sponsors in the House and 13 sponsors in the Senate. A hearing was held in the House Finance Committee on Jan. 31, 2017.
HB 1239/SB 5492 – the Tax Exemption Transparency and Accountability Act was first introduced in the 2015/2016 session of the Washington State legislature with 26 sponsors in the House and 12 in the Senate. The bill would require the Washington State Legislature to adopt a Tax Exemption Budget as part of the regular biennial budget appropriations process.The bill did not get enacted.
Changes are needed in the ability of the Washington State Legislature to fund basic services like education and healthcare. The Washington State Supreme Court in the McCleary decision in 2012 ruled that Washington State is not adequately funding public education as required by the Washington State Constitution. The current state budget problems are made more difficult by a tax expenditure/exemption process that is shielded from real legislative oversight by virtue of not being part of the normal budget process.
Many people are frustrated by the current stalemate in the legislative process and want more choices than just throwing up their hands and suffering more cuts in state services and more costs to working families.
By 2015 over 4 years $10 billion in state funding was cut from the budget. While revenue is starting to come back we were facing additional shortfalls in 2015 -2016. These included the $3-4 billion required by the McCleary decision and funding to pay teachers under I-1351 passed by the voters in 2014. The Washington State Senate was in Republican hands and opposed any new revenue and opposed cutting tax loopholes. Washington State’s 2/3 vote requirement to raise any new revenue was repealed by the Washington State Supreme Court in 2013 but the Republicans were not willing to repeal tax exemptions under any circumstances.
More options are needed for the voters than just saying we have no real choice but to cut programs helping people. Rather than continuing to ignore increasing state funding for schools, health care, seniors, and other state needs we need to raise additional revenue. One way to help is to cut corporate and special interest tax loopholes that are not creating jobs or helping meet priority state needs.
Some 694 tax expenditures had been passed by the Washington State Legislature as of 2016 according to the Department of Revenue’s 2016 Tax Exemption Report. Only about 73 of these have sunset provisions. In 2012 the Washington State Dept. of Revenue in their Tax Exemption Report noted that exemptions for B&O taxes and sales taxes totaled over $20 billion while actual revenue collected from these taxes equaled almost the same at $21 billion. By 2016 the estimates for combined B&O taxes and sales and use tax revenue for the 2015 – 2017 biennium were now $26.376 billion but now tax exemptions for this same tax base had increased to $28.238 billion. More potential revenue was excluded from collection than was actually being collected.
We cannot continue to operate a state in which over half of the baseline revenue available is given out as tax expenditures without ongoing accountability and transparency. Approximately450 of the 694 tax exemptions are discretionary and not required by Federal or state law or constitutional restrictions. Tax exemptions that are not meeting the state priorities of government or producing tangible benefits like creating new jobs need to be repealed and the revenue go to fund existing state needs like funding K-12 education at the level needed.
The Washington State Legislature needs to step up and act in behalf of its citizens and end this unaccountable off budget tax expenditure system by putting tax expenditures into the state budget process and reviewing the total revenue it is dealing with by its decisions. It needs to act responsibly to be good fiscal agents for the trust that citizens have put in their hands by adopting a Tax Expenditure Budget as part of the Omnibus Budget Appropriations bill every 2 years.