By MARILYN WATKINS
Guest Writer

Bargaining for tax breaks has become a routine part of doing business. During every legislative session, business lobbyists line the hallways of the state capitol demanding their own special tax exemptions.

And they get heard. In the past three years, Washington’s Legislature passed 61 tax break packages for businesses ranging from software giants, to car dealers, to soda pop distributors, giving away nearly half a billion dollars from the state’s 2007-09 budget.

The state now has 553 tax exemptions on the books. Some of them we all benefit from, such as the exemptions on food and prescription drugs. But most of the newer tax breaks are for particular types of businesses. Altogether they add up to a lot of lost public revenue that could be providing high quality preschool to every at-risk four-year-old, opening more slots in the Basic Health Plan for uninsured families, or retrofitting schools for energy efficiency.

For Washington to become a healthy land of opportunity for all, we need to make major new investments. For our kids to be prepared for citizenship and the global economy, we need great preschools, smaller classes in the public schools, and open doors to the state’s community colleges and universities. Our crumbling transportation infrastructure needs a 21st-century overhaul. And global warming requires major investments in energy efficiency and renewable resources.

But select businesses get tax cuts in the name of job creation, even when important programs go unfunded. And literally hundreds of studies across the nation have failed to prove that higher tax subsidies create more jobs. Now and then, a particular tax break might keep one plant from closing. But demand for products, transportation costs, energy supply, and availability of trained labor make far more difference in where a firm will locate and whether it will expand. Providing high quality public services that benefit everybody is a better economic development strategy than parceling out tax breaks to the industries that hire the most persuasive lobbyists.

Gov. Gregoire has proposed a state budget for the next two years with increases for education, children’s health care, and other high priority areas. These additions definitely move us in the right direction, but leave us far short of where we need to be. We just don’t have the money to make critical investments now, even with the economy perking along nicely.

We also don’t know if the tax breaks are having the results the lobbyists promised. The Legislature has made some progress towards accountability: About half of the new business tax breaks require companies that use them to report the number of jobs created, and some have sunset dates. Last year the legislature also established a citizens’ commission to review most tax breaks on a 10-year schedule. But there is a lot more that could be done. Here is what we should all ask our state legislators to do in 2007:

1. Hold the line on new tax breaks. After cutting programs because of budget shortfalls between 2002 and 2005, we finally have a little money to spend on new and expanded services. But in the long run, the state is facing more deficits. Investments in education, transportation, and sustainable energy are more important than more business preferences.

2. Require the Department of Revenue to tally and report on all of the tax breaks every two years. This tax expenditure report should be a part of the governor’s budget proposal. With an up-to-date accounting of all tax breaks before them, the governor and legislators could more easily adopt a state budget that truly reflects priorities for public investment.

3. Adopt and enforce uniform standards of accountability for existing business tax breaks. Legislators and the public have a right to know that tax breaks are delivering as promised. Expect results from the Citizens’ Commission for Performance Measurement of Tax Preferences and act on the recommendations.

Ultimately, the demand for ever more tax breaks is a symptom of our archaic tax system. Washington is plagued with a tax structure rooted in the economy of the 1930s. Tax preferences have become part of a vicious cycle, in which each new tax break erodes the tax base and the ability to fund high quality public services, exacerbates inequities, and leads to demands for more tax breaks.

If our children don’t have a world-class basic education, if our colleges aren’t graduating enough nurses, engineers, and high-level thinkers, if our cities are mired in traffic jams, and if our economy suffers shocks with every outbreak of violence in the Middle East, all the tax breaks in the world won’t generate more jobs. Let’s be sure our state budget for 2007-09 reflects our state’s real priorities.

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For a full report on Washington tax breaks, see www.eoionline.org.

Marilyn Watkins is a member of the Real Change Advisory Board and policy director of the Economic Opportunity Institute, a research and advocacy organization focused on building economic opportunity for all Washington residents.