Issue: In just the last three years, the Washington State Legislature approved at least 61 new or extended tax break packages that will cost the state nearly half a billion in the 2007-09 biennial budget. Those might be worthy tax exemptions, but currently the state has no process for comparing them with other important priorities during the budgeting process.
Background: Think of the state budget process as a much larger version of your household budget, but still based on the same important variables: revenue: what’s coming in, and expenses: what’s going out. But then add another, equally important aspect, tax exemptions: what could be coming in, but isn’t. If you’ve set up payroll deductions — to go directly to a charity, for example — you’d figure that into your budget too, right?
The logic behind providing tax breaks to specific industries is that there is public good that is created by these industries being strong and vibrant. Some tax breaks are intended to create new jobs and some are meant to maintain jobs in struggling communities. Other tax breaks are intended to promote environmentally sound practices, improve public safety, or help communities pay for local projects.
Some tax exemptions no doubt do exactly what they’re meant to do. But others are outdated and don’t have a built-in review process, and some are the result of political pressure from corporate lobbyists and may not provide a benefit for the public at all, just a benefit for their own bottom line. Hundreds of studies across the nation done over the past two decades have failed to prove that higher tax subsidies create more jobs. In fact, the evidence suggests that funding high quality public services like education is a better way to create a vibrant economy.
What’s needed in Washington is a clear mechanism for reviewing tax exemptions and determining how much good they do, in comparison with other important priorities like health care, affordable housing, and transportation. For example, the value of half the recently passed tax breaks could provide health insurance to 60,000 more adults and reduce the number of uninsured in our state by over 10 percent. The governor and legislators should have that information when they’re writing a budget.
Last year, the legislature made a good start at increasing accountability by creating a citizens’ commission to review existing tax exemptions. This year, the Washington Tax Fairness Coalition is urging the governor and legislators to build on that progress toward greater accountability by requiring that the fiscal impact of all tax preferences be reported as part of the budget and judged in context. That would provide the full picture in real time in order to make the best decisions about how to invest public resources.
Action: Contact your legislators today by calling the Legislative Hotline at 1-800-562-6000, and ask them to create a more accountable budget process by supporting House Bill 1827 and Senate Bill 6054.
Information for this column comes from the Washington State Tax Fairness Coalition (www.wataxfairness.org) and the Economic Opportunity Institute (www.eoionline.org).
For copy of actual issue, go to https://www.realchangenews.org/2007/02/21/feb-21-2007-entire-issue