Tax Exemption Transparency and Accountability Initiative Recieves Ballot Title

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.

Ballot Title
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.

View Complete Text PDF

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 info@taxsanity.org if you want to be keep informed of their efforts or want to help move this proposal forward.

Initiative 626 Receives Ballot Title from Washington State Attorney General

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.

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.

View Complete Text PDF

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. .

Let’s fix our unfair tax system in Washington State

Washington state’s tax system is broken. We have pressing state needs but do not fairly collect  revenue to adequately fund needed state public services like education and health care. We rank in the bottom third of states in raising revenue.  The Department of Revenue in January 2013 stated:

Washington ranked 36th from the top in state and local taxes paid per $1,000 of personal income in 2010, according to Census Bureau data published by the Washington State Department of Revenue.

At the same time we are ranked by the Institute on Taxation & Economic Policy as having the most regressive tax system in the country.

Washington State, which does not have an income tax, is the highest-tax state in the country for poor people. In fact, when all state and local sales, excise and property taxes are tallied up, Washington’s poor families pay 16.9 percent of their total income in state and local taxes.

Meanwhile the top 1% pay only 2.8% of their income in state and local taxes. This is a terribly unfair tax system that has shifted taxes onto those least able to pay.

Don Smith and I co-authored a MoveOn.org petition calling for the Washington State Legislature and Governor Inslee to pass legislation and funding to create a new Tax Reform Commission to study and recommend ways to fix our broken tax system.

We ask that you show your support for a new Tax Study Commission and the need for reforming our tax system by signing our petition. Add your name to the 3800 people  have already signed. Thanks.

Click on the headline directly below to sign the petition.

Let’s fix our unfair tax system in Washington State

Washington State has one of the most regressive tax systems in the country. In order to fix our broken, upside-down tax system, we first need to educate the public about the facts. But neither Governor Inslee nor the state legislators are making significant effort towards educating the public about why we need progressive taxation. We ask Governor Inslee to appoint a high level commission to evaluate our regressive tax system and propose changes that would allow the state to adequately fund education, social services and other essential needs. The commission should hold hearings throughout the state, solicit input from the public, and publicize its findings widely. We also call on Governor Inslee and the Democratic leadership to make speeches, publish essays, and hold public forums for discussion of this central issue.

Petition Background

In Washington State, the middle class and poor pay a higher percentage of their income in state taxes than do the rich, due to a reliance on the regressive sales tax to fund state government.

Even the Business and Occupation tax is regressive: it taxes revenue, not profit, and so it favors profitable corporations over struggling small businesses.

Another cause of unfairness is the existence of tax loopholes for certain wealthy corporations.

In fact, according to the Institute on Taxation and Economic Policy, Washington State has the most regressive tax system in the nation. The poorest 20% of non-elderly Washingtonians pay 17% of their income in state taxes; the richest 1% pay under 3% of their income in state taxes. (Source: http://www.itep.org/pdf/wa.pdf .)

The state desperately needs a reliable source of funds to pay for education pursuant to the State Supreme Court decision in the McCleary case, which declares that the legislature is underfunding K-12 education.

Additionally, in recent years the state has had to slash funding for social services and for higher education, causing real suffering among vulnerable people, threatening our prosperity and safety, and drastically raising the cost of a college education.

Voters in 2010 rejected I-1098, the initiative to establish a high earners’ income tax in Washington State. Most voters were voting against their own self-interest, because only the richest 2% of citizens would have seen their taxes rise.

But up until now, only a few advocacy groups have spoken up about this issue. Our political leaders should make the effort to educate the public about all the ways we need government and about progressive taxation. In other words, our political leaders should actually lead and not just follow.

The proposed high level commission, hearings, speeches and essays will help move the state towards a sustainable and equitable funding model.

For discussion of this effort, please visit:

http://fairtaxesnow.us/

https://groups.google.com/d/forum/wafairtaxes

To see the list of signers and their comments, please visit: http://waliberals.org/WATaxFixers.html

cross posted on www.MajorityRules.org

Sign Petition to Close Tax Loopholes Now!

You can help in our effort to close tax loopholes in Washington State by signing our petition to Governor Inslee and your Legislators.

In order to increase accountability and close tax loopholes, the Washington State Legislature should adopt a Tax Expenditure Budget as part of its biennial budget process.

Click here to Sign Petition

Petition Background

As off budget spending, tax exemptions lack the accountability that other state spending undergoes when the state approves its biennial budget. Tax exemptions are expenditures of state money that would otherwise be available to fund state services.

Tax exemptions reduce available funds for education, health care and other important state services. Many tax exemptions are actually tax loopholes that benefit special interests but don’t meet state priorities for funding.

Washington State currently has over 650 tax exemptions. According to the State Department of Revenue in the last biennium, while Washington State  for B&O taxes  it collected $6.5 billion but gave out $7.5 billion in exemption .Adding to the B&O tax collected the sales and use taxe,s the state collected some $21 billion total but it excluded from collection over $20 billion in tax exemptions.  The system is broken.  If every business  paid the same in taxes, the state would have twice as much  revenue or it. Or it could cut everyone’s taxes in half. Or it could split the difference both reducing taxes and collecting more revenue..

Requiring that the Washington State Legislature adopt a Tax Expenditure Budget every two years as part of the biennial budget process would make tax exemptions more open, transparent and accountable to Washington taxpayers. The Legislature needs to prioritize tax exemptions and close tax loopholes not meeting state needs.

Creating a Tax Expenditure Budget detailing the tax expenditures (exemptions) and the amount of revenue the Legislature is not collecting, will help Legislators to prioritize closing tax loopholes not meeting state priorities and needs.

Vote “MAINTAIN” on Eyman Advisory Votes this November

Washington voters should vote  “Maintain” on the five Advisory Votes on the November 5th ballot. These Tax Advisory votes  are a Tim Eyman anti-tax push poll that he has gotten taxpayers to pay for when they voted for his Initiative 960.

There is no explanatory statement, pro and con statements or a fiscal impact analysis like what’s required for initiatives and referendums. Eyman specified the language of the ballot title. The Attorney General is required by law to write ballot titles for initiatives and referendums placed on the ballot but Tim Eyman decided he would rather do it himself so he could be sure his anti-tax bias would prevail. Even repealing tax exemptions for special interests like out of state banks is considered a tax increase by Eyman.

Vote “Maintain” on the advisory votes and show Eyman that  voters are not so easily fooled by his libertarian agenda to cut all taxes and reduce public support for education and health care and other public services.

The Washington State Budget and Policy Center just released its analysis of the Advisory Votes. You can read their analysis  here in their post entitled “Public Advisory Votes on November Ballot are Tailored to Deceive”   As the Washington State Budget and Policy Center notes:

You don’t have to look any further than the November ballot to see the consequences of the deceptive “advisory vote of the people” law, which was purposefully designed to mislead the public and undermine any action taken by policymakers to maintain funding for schools, health care, public safety, and other investments that promote a strong state economy.

Created by Tim Eyman and other conservative ideological interests, these votes are meant to deny voters an informed and balanced discussion of state taxes. …

…it is clear that the only reason advisory votes were included in Eyman’s broader initiatives was to distort the public dialogue on taxes and the investments they support, and to dissuade policymakers from making any reasonable changes to our flawed tax system.

Please read the whole article as it goes into specific detail as to why the whole advisory vote process Eyman set up is deceptive and flawed. The exact language coming from Eyman’s I-960 should be repealed for what it is – another Eyman biased anti-tax hoax.

see also earlier post on Tax Sanity – “Vote to “Maintain on Tax Advisory Votes the November”

Majority Rules –  Vote “Maintain” on Five Eyman “Tax Advisory Votes”

Republican Government Shutdown Hurting People’s Jobs and Lives

The Republican Government Shutdown is hurting people by cutting their jobs and income.  Many will not be compensated because they are not Federal employees. Most Republicans in Congress don’t seem  to understand or care.  What was originally an attempt to go backward on healthcare by not funding the Affordable Care Act has now become an ideological attempt to reduce government spending and the deficit.

Unfortunately Tea Party Republicans are so blinded by their libertarian ideology that they are ignoring the disastrous impact they are having on many people’s lives, jobs, income and businesses. These people including children are the innocent victims of anti-government libertarian ideologues whose tactics are literally bordering on anarchy.

While government workers who are furloughed by the Tea Party Republicans are not being paid now, Congress voted to pay them later. But their getting pay is like a free gift; the government and the public is not getting the benefit of their labor or keeping money flowing in the local economies impacted.

Here are just a few of the impacts now being revealed.

As the Huffington Post notes:

“…for thousands of furloughed workers who aren’t federal employees, no paycheck is coming.

The shutdown of national parks has sent home as many as 15,000 private-sector workers, including federal contractors and non-federal employees who work on national parkland, according to American Recreation Coalition, a park advocacy nonprofit.

The New York Times in an article entitled Ripples from the Shutdown Left without Government Services, Small Business Feel the Pinch, they report that:

The Small Business Administration says it backs an average of $96 million in small-business lending each day. Having that financing stream frozen sets off a chain reaction of economic pain, said Anthony R. Wilkinson, who heads the National Association of Government Guaranteed Lenders, a trade group. “There are restaurants that aren’t being opened and contracts that aren’t being fulfilled,” he said. “As this drags on into Week 2, people are getting pretty worried.”

The toll may not be conspicuous yet in the broader economy, but at the local level, the ripples are spreading. At many banks, direct small business lending is stalled too, because much of the Internal Revenue Service is closed, preventing lenders from checking tax information provided by applicants. Business owners are also grappling with the absence of other crucial government services, like E-Verify, the online system companies use to confirm the eligibility of prospective employees to work in the United States.”

The article has a number of cases of businesses and people where the impact is being felt and the anxiety is increasing. Tea Party Republicans are hurting people and the economy and it needs to end. And it makes no sense to temporarily fund the government for a few weeks more and then start all over again adding to the current mess by repeating this over and over. Commentary in the Times article says it best.

Mr. Leh said he was monitoring the debt-ceiling fight in despair. “The thing that’s literally scaring me to death is this reckless behavior,” he said. “They’re going to drive the interest rates up. I’m on a 6 percent variable loan — if it goes up two points, that’s a huge impact for a business my size. And there’s nothing you can do. You just watch the madness continue.”

Ms. Ozer said she heard dozens of times each day from business owners with similar concerns, and it infuriated her.

“Just as small entrepreneurs are willing to take some risks again, the government goes and begins to behave like irresponsible children,” she said. “They make decisions that adversely affect the economy, when it’s so fragile to begin with.

“The real tea party threw tea into the Boston harbor. These people are throwing businesses and people’s salaries.”

I think these last comments sum it up well. “behaving like irresponsible children”. If you’ve ever watched a child throwing a tantrum and rolling around on the floor yelling to get what they want, this is what the Tea Party Republicans are doing. It’s all about what they want, not about what’s good for the people they’re supposed to represent or what’s good for the economy or the country. They are so blinded by their right wing ideology and selfishness that they are not seeing how they are hurting others in this country.

These Tea Party Republicans were backed by millions of dollars in contributions  from the Koch Brothers and other special and corporate interests. They are not people that should have been elected in the first place but woe be to those that re-elect them because you can now plainly see where their priorities are. They are not about helping working families, children, the elderly and others who live paycheck to paycheck and need help from the government to survive.

While the Tea Party Republicans so hate helping struggling citizens hurt by their tantrums, they seem to have no problem continuing to give corporations huge tax breaks which is really corporate welfare. Nor do they seem concerned that more and more of the countries wealth is being concentrated in the top 1% and they continue to push for more tax cuts for the wealthy. .Please do not re-elect these free market pro tax loophole advocates to office again. Judge them by their actions and work to get them voted out of office.

Vote to “Maintain” on Tax Advisory Votes this November

This upcoming Nov. 5, 2013 General Election Ballot in Washington State has  5 Tax Advisory Vote measures put on the ballot as a result of Tim Eyman’s Initiative 960. Voters should vote to “maintain”+ these measures.

The 5 Advisory votes are just that – advisory and will change nothing in law.  These advisory votes were put there by  Eyman’s Initiative 960 as his attempt to increase public resentment to any “tax” measures despite their benefit to the larger public. The ballot title for each is basically written as an  anti-tax push poll based on Eyman’s initiative language that stipulated the ballot title wording.  They carry no legislative weight as they only record the voters opinion. But he uses the votes to show public opposition to funding public services.

Initiative 960 required the ballot language this way. The legislature imposed, without a vote of the people, (identification of tax and description of increase), costing (most up-to-date ten-year cost projection, expressed in dollars and rounded to the nearest million) in its first ten years, for government spending. This tax increase should be:
Repealed . . .[ ]
Maintained …[ ]

As you can see the language is written such that it is a classic push poll question with key words and phrases to induce voters to oppose a measure without even understanding what it is about.The highlighted language above is the required wording by Eyman .I’ve highlighted the required language written by Eyman to make clear how little is left to the Attorney General to write.

You can read more about the outcome of the advisory vote in 2012, when voters voted against two measures clearly passed to benefit middle class tax payers. See Tim Eyman’s Libertarian Vision for Washington State  on MajorityRulesBlog.

Unfortunately for Taxpayers this push poll is paid for by the taxpayers. See heraldnet.com article Voters will give advisory vote on 5 tax measures. The herald net article only discusses the printing cost of voters pamphlets and not the election costs for ballot printing and counting the votes, which is not insignificant.

Both Democrats and Republicans overwhelmingly voted in the Legislature to approve all 5 of these measures, including to repeal some tax exemptions and fix the inheritance tax exclusion set up by a court decision, to secure revenue to help fund the budget. If you are a Washington voter you should affirm these votes and vote to “maintain” all 5 of these measures.

Advisory Vote No. 3 (Substitute Senate Bill 5444)

Ballot Title

The legislature eliminated, without a vote of the people, a leasehold excise tax credit for taxpayers who lease publicly-owned property, costing approximately $2,000,000 in the first ten years, for government spending.

This tax increase should be:

[  ]  Repealed

[x]  Maintained

Advisory Vote No. 4 (Senate Bill 5627)

Ballot Title

The legislature imposed, without a vote of the people, an aircraft excise tax on commuter air carriers in lieu of property tax, costing approximately $500,000 in its first ten years, for government spending.

This tax increase should be:

Repealed   [  ]

Maintained   [x]

Advisory Vote No. 5 (Engrossed Substitute House Bill 1846)

Ballot Title

The legislature extended, without a vote of the people, the insurance premium tax to some insurance for pediatric oral services, costing an amount that cannot currently be estimated, for government spending.

This tax increase should be:

Repealed   [  ]

Maintained  [x]

Advisory Vote No. 6 (Second Engrossed Second Substitute House Bill 1971)

Ballot Title

The legislature eliminated, without a vote of the people, a retail sales tax exemption for certain telephone and telecommunications services, costing approximately $397,000,000 in the first ten years, for government spending.

This tax increase should be:

Repealed   [  ]

Maintained   [x]

 Advisory Vote No. 7 (Engrossed House Bill 2075)

Ballot Title

The legislature extended, without a vote of the people, estate tax on certain property transfers and increased rates for estates over $4,000,000, costing approximately $478,000,000 in the first ten years, for government spending.

This tax increase should be:

Repealed   [  ]

Maintained   [x]

See here on the Washington Secretary of State’s website for more details on all 7 statewide measures on the November 5, 2013 General Election Ballot.
Secretary of State’s Listing of Statewide Measures on the Nov. Ballot

See also Progressive Voters Guide

Public Policy Votes on November Ballot Are Tailored to Deceive – Washington State Budget and Policy Center

Initiative 605 – latest version of Tax Loophole Reform Initiative

The latest version of the Tax Loophole Reform Initiative is Initiative 605.  It has now received a ballot title and summary. Here is the information from the Washington State Secretary of State’s website. We will be appealing the ballot title as we believe it does not accurately reflect the main thrust of the initiative – which is to create a Tax Expenditure Budget that reflects the current off budget spending by the state in terms of tax exemptions, credits, deductions, and preferential tax rates that exclude almost as much money as what the state collects in revenue to fund operating the state and providing state services.

Ballot Title
Initiative Measure No. 605 concerns state revenue.

This measure would count tax exemptions, credits, deductions, and preferential rates toward the state expenditure limit; allow raising the limit without voter approval if required by court order; and repeal tax advisory votes.

Should this measure be enacted into law? Yes [ ] No [ ]

Ballot Measure Summary
This measure would require existing and new tax exemptions, credits, deductions, and preferential rates (called “tax expenditures”) to count toward the state expenditure limit and be included in appropriations bills. The state expenditure limit could be raised without voter approval if required by court order. Advisory votes on tax legislation would be repealed. Priority ranking and additional reporting requirements would apply to tax expenditures. Elimination of expenditures and fee increases would not constitute “raising taxes.”

View Complete Text PDF

Tax Loophole Reform Initiative to Washington State Legislature Filed

Tax Sanity ( www.taxsanity.org )  on May 17, 2013 filed an Initiative to the Legislature to address the issue of Tax Loophole Reform.

As noted in an article in Crossscut entitled Tax exemptions are starting to draw an uncomfortable spotlight:

Tax Sanity filed paperwork Friday with the Washington Secretary of State to start an initiative campaign to require the state Legislature to list every tax exemption in every budget passed by the House and Senate. The idea is that each of the state-controlled tax exemptions should be considered as a budget expense — and should be considered as such in each biennial budget, said Tax Sanity leader Steve Zemke.

Out of the state’s roughly 640 tax exemptions, the Legislature controls 452. The others are required by the state Constitution or the federal government.

The initiative proposes that tax expenditures be incorporated into the Biennial State Budget Process and be subject to the same review and consideration that other state expenditures undergo during the budget process.  Right now tax expenditures are dealt with as off budget spending and not seriously considered as to their effectiveness or how they may or may not meet the current state priorities of government. This initiative proposes to remedy some of the current problems. You can review the text on our website at http://www.taxsanity.org/taxpayers-tax-loophole-reform-version-b/

The initiative proposes the following:

  • Tax expenditures are incorporated into the  State Budget by creating a Tax Expenditure Budget
  • Tax expenditures that are  required on state or federal constitutional grounds are not part of the Tax Expenditure Budget
  • The Tax Expenditure Budget must be approved as part of the biennial state budget process
  • The state spending limit is increased to include the Tax Expenditure Budget to reflect the actual level of state expenditures.
  • The state spending limit may also be increased to comply with a State or Federal Court order.
  • Additional criteria are added in reviewing the effectiveness of tax expenditures in meeting the Priorities of Government
  • Expensive statewide advisory votes on revenue increases are eliminated to save taxpayer dollars
  • Repealing a tax expenditure is not defined as a tax increase but a return to the tax base.

We ask that you carefully read the proposed initiative and provide us with any suggestions you may have to improve it. This is your opportunity to give us feedback and address concerns you may have with our proposal.  We will consider revisions before we finalize the language and put the initiative before the voters for them to sign. Please respond by May 31st to insure that your comments are considered.

Please feel free to contact us to discuss this measure further.

Send comments to:

Steve Zemke
Director – Tax Sanity
stevezemke@msn.com
www.taxsanity.org
As an initiative to the legislature sponsors have until Jan 3, 2014 to file petitions with the valid signatures of 246,372 registered Washington State Voters.  Typically sponsor collect up to 25% more signatures to take care of duplicate and invalid signatures.This means about 320,000 signatures will be needed. More information of the Washington State Initiative process can be found in the publication from the Washington Secretary of State’s Office entitled, Filing Initiatives and Referenda in Washington State.

The Washington State Legislature can respond to the initiative three ways:

1. It can vote to enact it, it which case it becomes state law.

2. It can ignore it, in which case it will automatically go onto the November 2014 ballot.

3.  It can ignore it, but draft an alternative in which case both measures go onto the November ballot.

 

Time for Citizens to Get Serious About Closing Tax Loopholes
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The Washington Wire has printed a story entitled “Will this finally be the Year for a Loophole Initiative?” The story is about  Tax Sanity’s efforts  for tax loophole reform in Washington State –  as Eric Smith notes, year after year people say the system is broken and something needs to be done. Yet little happens. It is up to those of us that want to see change happen to work to make it happen.

Tax Sanity is currently revising a draft and will soon file an initiative to the legislature.

As the Department of Revenue notes in their 2012 Tax Exemption Study some 640 tax exemptions currently exist in Washington State. Not all these exemptions aka tax expenditures are tax loopholes in the technical but they are all off budget expenditures with little oversight as to their need or effectiveness.

The pressing issue is whether tax expenditures are fulfilling a state need like our priorities of government and if they are an effective use of tax revenue that could better be used elsewhere. Even though the state  started  a more thorough review of tax expenditures through legislation setting up the Joint legislative Audit and Review Committee and a Citizen Commission for Performance  Measurement of Tax Preferences a few years ago, the Washington State legislature for the most part has chosen to ignore their recommendations.

How serious is the issue? Well looking at the 2012 Tax Exemption Report, the state in the current biennium budget period gave out 176 tax breaks for B&O taxes totaling some $7.5 billion while collecting only $6.5 billion in revenue. The exemptions were 54% of the potential tax base.

When an exemption is given it means that a tax shift occurs so the responsibility falls on someone else. In the same 2011-2013 biennial budget,  when you add the public utility tax, retail sales/use tax and real estate excise tax to the B&O taxes referenced above, the state projected some $22.78 billion in revenues, while exempting some $21.16 billion. The exemptions as a percent of the tax base was 48.2%.  Basically for every dollar raised, a dollar was not collected.

One problem is that there is heavy scrutiny of every dollar raised as to how it is spent as part of the state budget.  Unfortunately the other dollar that was not collected but listed as a tax expenditure is off budget spending and has not been subject to rigorous evaluation as to whether it is a dollar wisely spent. When the dollars add up to  some $20  billion it is now a huge problem.

As an example of whether tax expenditures are a wise use of tax dollars take the example of a tax expenditure Microsoft took a few years ago. As Danny Westneat noted in a 2011 column in the Seattle Times entitled, “Microsoft doesn’t need our tax break”,   Microsoft got a $104.5 million dollar sales tax break from the state. At the same time, Microsoft reported that it had over $52 billion in cash and short term investments sitting in the bank. Microsoft got its tax break while the state legislature cut K-12 education and funding for our state colleges and universities. This is just one example of how state tax dollars are not being wisely used to fund our state needs.

As long as the Legislature does not assume responsibility for diligently scrutinizing the tax breaks on its books, the state is wasting revenue that could go to meeting pressing state needs like funding education instead of adding to the corporate bottom line. Only 10% of existing tax expenditures have a sunset provision – the rest continue to exist without any pressure on the legislature to repeal them even when they are clearly not needed. And the Legislature has repeatedly refused to add sunset provisions to existing tax expenditures.

And even when a sunset provision was added, it typically was for 10 years. Yet we expect our state schools and transportation system and parks and everything else to operate on a two year budget, subject to change in a supplemental budget every other year.  State lawmakers are much more sympathetic it seems to helping businesses even when there is no legislative intent given than they are to meeting the state’s highest priority according to our state constitution, which is educating our kids.

The system is broken and the Legislature, particularly under Republican lawmakers, is not able to change it.  And voters have not helped by supporting Tim Eyman’s unconstitutional voting provisions which have said a 1/3 minority in one House would trump majority votes in both houses when it came to sunsetting tax expenditures that didn’t work.  That allowed legislators to continue to pass off budget tax expenditures by a majority vote while requiring a 2/3 vote to repeal them.(I-1053, I-1185).

Who benefits most by such a system are corporate interests who like that the 2/3 vote requirement was really a Tax Loophole Protection Act. It also prevented the Legislature from raising taxes on corporate and business interests  who would benefit from college educated workers. Instead Legislators cut education revenue and tuition at places like the University of Washington saw costs double for student tuition from $6000/yr to $12,000/yr over about 4 years.

Tax Sanity does not see the current system correcting itself and believes the citizens will need to do it through the initiative process.  That is why we are drafting an initiative to the legislature for 2014.  Signature will need to be collected through December of this year. A minimum of 246,372 valid signatures are needed.  So the goal will be to collect at least 300,000 to take care of invalid signatures and duplicates.

You can check out two different initiative drafts Tax Sanity is working on under the “initiative draft” tab above.  We will write more specifically on the proposed ideas we are working on as we get further feedback.