Tag Archives: tax loopholes

Tax Sanity Pushes for a Tax Expenditure Budget for Increased Accountability and Transparency

Tax Sanity has been busy drafting legislation to create a tax expenditure budget bill to increase transparency and accountability over Washington State’s ever growing tax exemptions.  The most recent special legislative session saw the Governor and the State Legislature push for additional tax breaks for Boeing, creating the largest state corporate tax break in the nation. As Reuters reported, “The Washington state legislature … passed a measure to extend nearly $9 billion in tax breaks for Boeing through 2040 in an embattled effort to entice the company to locate production of its newest jet, the 777X, in the Seattle area.”  And even it may not be enough to keep Boeing here as now a race to the bottom is occurring as other states compete to try to lure Boeing to their state.

Tax Sanity believes the continued push to create more and more tax exemptions is out of control.  There needs to be more accountability for results and more transparency in who is benefiting and who is losing. They propose doing this by requiring the legislature to create a tax expenditure budget detailing all the exemptions, their cost and who they benefit that the legislature has to adopt every two years as part of the general appropriations budget or exemption will expire.

Their latest draft which they are urging legislators to adopt has also been filed as an initiative to the legislature.  Initiative 626 has just received the following ballot title and summary:

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

Washington State currently has over 650 tax exemptions.  While some are required by our State Constitution or the US Constitution or by Federal law, the discretionary ones still number over 400. They are usually described as either an exemption, exclusion or deduction from the base of a tax; a credit against a tax; a deferral of a tax or a preferential tax rate. They are all  off budget spending that once granted almost never is rescinded. Only 10% of them have sunset dates. They represent expenditures of tax dollars which if not exempted from collection would be available as state revenue to fund critical state needs like education or health care.

The magnitude of the situation is not clear to the general public. Yet last year the Washington State Department of Revenue in its once every four year report on tax exemptions listing the discretionary tax exemptions points out why they are more appropriately called tax expenditures.  This is what most other states call them.  They are revenue that is not collected from some taxpayers but is collected from others. They noted that while we collected some $6.5 billion in B&O tax revenue in the last biennium, we did not collect but “exempted” some $7.5 billion.  We collected less than half the B&O tax revenue  available if every business paid the same.

When the sales and use tax collection was added to the B&O tax collection, essentially the same net result occurred.  The state collected some $21 billion in revenue but excluded $20 billion from collection.  Tax exemptions continue to grow with the Legislature adding another 15 in the 2012 session.

The process is out of control. This is why Tax Sanity is urging the state legislature to let the public know the extent to which they are supporting tax expenditures, who is benefiting and how much they are receiving. No future legislature is bound by the actions of past legislatures. Legislators have a responsibility to use tax dollars wisely, including being judicious and wise in giving out tax breaks. The Legislature needs to be held accountable for the current out of control use of tax exemptions to benefit special interests and business while cutting public services like education and health care. Requiring them to adopt a tax expenditure budget every 2 years as part of the regular operating appropriations budget and end the shifting of state revenue to off budget spending that lacks accountability and transparency.

Tell Your Legislators and Governor Inslee You Support Closing Tax Loopholes!

You can help in our effort to close tax loopholes in Washington State by signing our petition to Governor Inslee and your Legislators. We have created a petition on MoveOn.org to show support for closing tax loopholes. We support the Legislature being required every two years to adopt a Tax Expenditure Budget to end off budget spending via tax exemptions that lack  the transparency and accountability that other state spending undergoes.

“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.

Big Oil Loves Tim Eyman

Big Oil loves Tim Eyman.  They love him so much they’re have given him $200,000 this year to protect their corporate profits and tax loopholes from the Washington State Legislature. They love it that he helped them two years ago prevent the Legislature from asking them to help clean up oil polluted stormwater in our state. They love it that voters said the Legislature needed a 2/3 vote to tax corporations and end profitable tax loopholes they have.

Eyman is busy carrying their water as he scurries to pay his minions to get signatures on I-1185 his “son” of 1053. I-1053 was passed by voters in 2010 and said the Legislature needed to get a 2/3 vote in both houses to raise new revenue or close any tax loopholes. For 2 years after an initiative passes it takes a 2/3 vote of the Legislature to amend an initiative. After that it takes a simple majority.

So Eyman is trying to put I-1185 before the voters to reset the clock for another 2 years.

The 2/3 vote requirement initially was in I-601 and then in I-960.  Both these measures barely passed 51% to 49%. Two years ago in the midst of the worst recession since the Great Depression and with high unemployment the measure passed with a 64% vote after opponents waited until the last few weeks to try to oppose it but it was too late.

Now voters can see the consequences of a no new taxes proposal which is what I-1185 is and what I-1053 is.  Austerity so to speak is another w0rd for protecting corporate profits while cutting services to the elderly, the sick and young kids.  Corporate interests like BP and Conoco Phillips continue to rack up huge profits and contribute to the increased concentration  of wealth in the hands of the few.

On April 4, 2012 BP Oil out of Chicago gave Eyman $100,000. Eyman immediately passed it on to his buddy Roy Ruffino at Citizen Solutions out of Olympia.  Citizen Solutions is paying signature gatherers $1.00 per signature and pocketing a fee for itself of course.

BP last year reported a net profit of $23.9 billion. $ 100,000 is peanuts to BP.

On April 20, 2012 Conoco Phillips added another $100,000,  Small peanuts to them also that they  can write off as a business expense. After expenses Conoco Phillips reported a 1st quarter Jan – March 2012 profit of $2.94 billion.

Isn’t it great that if you are a big corporation and you can buy yourself a place on the ballot and you can have friends like Tim Eyman to help you fool the public into supporting your corporate profits at the expense of diminishing public services that benefit the public.

Don’t sign I-1185!  Don’t support Big Oil’s power grab of the Washington State Legislature. Big Oil is not concerned about the well being of Washington State or its citizens. They are only concerned about increasing the bottom line of their business and their shareholders.




Eyman’s Initiative 1185 is Road to Nowhere

Tim Eyman is out getting signatures on his latest initiative for gridlock in Washington State.  It is nothing new but a recycling of a failed experiment – namely that blocking the Legislature’s ability to raise revenue or repeal non-performing tax exemptions is good for Washington State. That policy has been a dismal failure.

Initiative 1185 is an attempt to get voters to re-pass Initiative 1053 which was passed by voters in 2010. Initiative 1053 required Legislators to get a 2/3 vote in the House and the Senate  for any measure that raised revenue to fund state services.

Not once in 16 years has the Legislature been able to raise revenue under the 2/3 voting requirement because only a 1/3 minority of Legislators in either House can block a revenue increase. This statement was given recently in a Superior Court case attempting to declare I-1053 and its 2/3 vote requirement as unconstitutional.

The reason Eyman is recycling his 2/3 vote requirement is so that the Legislature can not amend I-1053 without a 2/3 majority.  The Washington State Constitution allows the legislature to amend initiatives by a simple majority after 2 years but requires a 2/3 vote for the first two years after passage. Re-passing I-1053 as I-1185 would reset the 2/3 requirement for another 2 years.

I-1053 was supported by Big Oil, Wall Street Banks and other corporate interests that didn’t want the state to repeal special interest tax exemptions and loopholes or require them to pay more for the benefits of doing business in Washington State.

Eyman portrayed I-1053  as a measure to protect the average citizen taxpayer from big government but the reality is that 1053 is really a Corporate Tax Loophole Protection Act.  Tax Loopholes exempt many corporations from paying taxes at the same rate as others.  In essence it shifts the tax responsibility to other tax payers like working families.

I-1185, like I-1053, would require a 2/3 vote to repeal tax loopholes even if they are providing no benefit to the state.  Tax exemptions only require a simple majority to pass in the first place. Meanwhile cuts to state services like education for our children and health care for seniors have been cut.  Only a simple majority was needed to cut that funding.

I-1185 would continue tax protection for corporations while forcing more cuts in state services. As service costs increase due to inflation and revenue doesn’t increase due to a lagging economy more cuts will be necessary. Don’t sign Initiative 1185. It time to bring some sanity back to how we fund state services.


Tax Exemptions Run Amok in Olympia

Over the last three years Washington State Legislators has passed 61 measures to extend or create new tax exemptions. These exemptions have removed almost a half billion dollars from the 2007 – 2008 biennial budget.

The Economic Opportunity Institute has documented what has happened in a detailed report they issued last year, entitled “Adding up: New Tax Breaks in Washington 2004-2006″

These exemptions are really expenditures and represent a loss from potential revenue available for use by the Legislature in preparing the current budget for the state. Yet the exemptions do not appear as expenditures or potential revenue anywhere in the current budget process.

Once every 4 years a separate report is issued, independent of the budget documents, as if these exemptions do not exist as potential revenue for consideration in determining budget priorities.

Last year when I asked former House Finance Committee Chair Jim McIntire if he knew of any tax exemption that the Washington State Legislature had repealed in the last legislative session he sheepishly said no. Unfortunately most legislators don’t view these special interest tax exemptions as expenditures and potential sources of revenue that the Legislature should consider when preparing a new budget.

Rep. Sharon Tomiko Santos is proposing to change that. She is the prime sponsor of HB 1827. The bill is very simple. It says that, as part of the budget process, a report of the current tax exemptions and their costs must be included along with the state budget.

It is an important step to hold the legislators accountable for their decisions regarding giving tax exemptions and their impact on the state budget. Passing HB 1827 would represent an important step in opening up the budget process to more public scrutiny and would give taxpayers a better understanding of where expenditures are being made, especially as regards special interest tax exemptions which remove revenue from other needs like health care for children or education.

Senator Pridemore has introduced the same legislation in the Washington State Senate as SB 6054.

The Washington State Tax Fairness Coalition has made this legislation one of their top priorities in this legislative session. They have set up a web page where you can easily contact your legislators to let them know this is something you also think needs to be passed. Click here to go to their page now.