Lawmakers have let only four tax breaks expire since the state's Joint Legislative Audit Review Committee and a citizen commission on tax breaks began reviewing the state's more than 500 exemptions in 2006.
Ninety-five favorable tax rates have been reviewed – starting with the oldest ones, enacted in 1891 – and those eliminated were worth just $5.7 million a year. Meanwhile, lawmakers are looking this year at extending some old tax breaks or creating new ones as they face a shortfall of up to $4.6 billion.
But Democratic Sen. Phil Rockefeller of Bainbridge Island thinks some tax loopholes – known as “tax preferences” at the Capitol – deserve a closer look. Like other lawmakers this year, he was vague in saying there was any one that needs closure.
But he said he wants more action on tax reviews to benefit taxpayers. And he is going back to look at a few of the exemptions that the Joint Legislative Audit Review Committee and a citizen commission on tax breaks have recommended over the years for sunset or clarification.
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“It doesn’t look right to me. . . . The average taxpayer would say, ‘You’ve invested a lot of effort’” in the audit review committee to not make use of it.
The four tax breaks allowed to lapse: a temporary tax break bestowed on beef processors after a “mad cow” disease scare; a tax break for rural county software and desk-help firms; and breaks on purchases of field burning equipment and patient-lifting equipment used by nursing homes and hospitals
T-WORD NOT POPULAR
Republicans and most Democrats have been chilly to eliminating tax exemptions this year or raising taxes. Republican Rep. Gary Alexander of Thurston County says majority Democrats should work to balance the budget with existing revenue – despite a looming shortfall of up to $4.6 billion.
Democratic House Speaker Frank Chopp of Seattle has been reluctant to talk about closing exemptions. And House Ways and Means Chairman Ross Hunter – who managed to close a few tax breaks last year to raise several hundred million dollars – offered a blunt view Friday.
The Medina Democrat said he can’t see getting a two-thirds legislative vote for a tax measure – after voters approved Tim Eyman’s Initiative 1053 last fall.
That’s not the way nurses, mental health counselors and other health care workers from Service Employees International Union 1199NW saw it when they marched on the Capitol on Thursday.
The more than 100 SEIU activists held a noisy protest outside a Bank of America branch in downtown Olympia before going to talk to lawmakers. They urged elimination of Washington’s generous tax exemption on interest that banks earn on first mortgages, and they want it to pay for health programs that are on the budget chopping block.
SEIU 1199 spokeswoman Linnae Riesen says I-1053 is no excuse for not looking at exemptions.
“We’re not buying that,” Riesen said after the protest at the bank. “Voters never said, ‘Let’s cut health care.’”
Reisen said “there is broad support” for House Bill 1847, introduced last week by Rep. Eileen Cody, D-Seattle. It would close tax breaks to collect $150 million to $200 million for the state’s Basic Health Plan, which subsidizes health insurance for 52,000 low-income people whose earnings are high enough to disqualify them from Medicaid.
Of the tax breaks in Cody’s package, SEIU and other advocates have put most of their attention on the bank tax break, which Hunter proposed to eliminate last year but was unable to get passed through the Senate. It would set a $100 million cap on the exemption for banks’ first-mortgage interest earnings – in effect hitting mostly giant out-of-state banks such as Bank of America, which bought up troubled mortgage lender Countrywide Financial.
The banking industry objects to Cody’s tax proposal and was able to defeat it last year when Hunter pushed for it and the Democrat-controlled Senate rejected it.
So far, lawmakers are looking more in the direction of Bank of America than in SEIU’s.
But if Rockefeller gets his way, lawmakers in both chambers might get a few more small tax breaks to look at.
The Citizen Commission for Performance Measurement of Tax Preferences’ most recent report was issued in draft form in January. It recommends letting a few more tax preferences expire July 1, including:
• A temporary, $5 million break in the business and occupations tax for fruit and vegetable manufacturers, because too few jobs are being created or retained as a result.
• Similar breaks worth $3.3 million for seafood products manufacturing, $1.5 million for dairy products manufacturing and $1.1 million for fresh food processing.
Brad Shannon: 360-753-1688
For more information about the tax recommendations from the Citizen Commission for Performance Measurement of Tax Preferences, go to www.citizentaxpref.wa.gov/reports.htm. For more information about the commission, go to www.citizentaxpref.wa.gov.