Lawmakers in the state House have given bipartisan blessing to a few ideas for new tax exemptions this year, despite a budget shortfall that is widely expected to deepen beyond $5 billion next week when a new revenue forecast is revealed.
Another 30 or so proposed tax breaks have yet to move out of the House or Senate, but supporters of several of them say they are still very much in play.
But budget writers are struggling to maintain state programs and say they are looking skeptically at every request that costs the state money.
And a small minority of lawmakers, including Rep. Chris Reykdal, D-Tumwater, and Rep. Glenn Anderson, R-Fall City, are reluctant to approve any new tax breaks without a broader overhaul of the tax code. The pair voted against exemptions that would help Pierce County mental-health care providers, a small Seattle lender and Goodwill.
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“They’re all incredibly worthy causes,” Reykdal said, “but the bigger picture is we are hemorrhaging money around here in tax breaks.”
A coalition of unions, liberal groups and others advocating for closure of existing tax breaks to prevent budget cuts says exemptions lawmakers have proposed this year – including some that aren’t going anywhere – would cost state and local governments more than $90 million.
Ideas still alive include exemptions for recreational sports leagues, zoos and aquariums and minor-league baseball teams. One of the priciest proposals would extend and expand a tax credit for film and TV production that ends July 1, aimed at competing with the 43 other states that offer such incentives.
Many of the hopeful recipients point to their valuable work or say they are just trying to win fair tax treatment compared with similar organizations or businesses – or both, in the case of nonprofit Pierce County mental health agencies.
They’re the only ones in the state that get pass-through public money from a for-profit company, OptumHealth, rather than directly from the government, so they’re taxed on their work.
“Currently, private nonprofit mental health agencies in every other county in the state do not pay a business and occupation tax,” said OptumHealth spokesman Brad Lotterman.
The Economic Future Coalition says the changes proposed this year are on top of $1.6 billion in exemptions added since 1996. They want tax breaks reviewed and some eliminated.
Anderson is no supporter of the “special interest groups” looking to end tax exemptions for a select few they see as bad, he said, but he thinks business taxes need to be overhauled as a whole using a thoughtful approach.
“The fact that we’re doling out more tax exemptions, and then there’s a big argument about eliminating them all, it seems like the Legislature really doesn’t know what it’s doing,” Anderson said.
PUSHBACK FOR GOODWILL
One exemption meeting serious resistance would not cost the state a dime.
It’s the cost to other taxpayers lawmakers are more worried about.
Organizations such as Goodwill that help prepare workers to find a job are already among the many nonprofits that pay no property taxes on buildings they own. They want a new exemption for buildings they lease.
Tacoma Goodwill rents most of the 27 stores it runs across the state, CEO Terry Hayes said. She said the state’s five Goodwill organizations could use the money they save in taxes to serve about an extra 750 unemployed workers.
“We will use those funds for job training to put more people to work,” Hayes said. Getting them employed would save the state millions in payouts for welfare and disability aid, she said.
Most of the estimated $1.6 million cost would be shifted to other property taxpayers. Goodwill says they would barely notice the cost – 46 cents per year on a $250,000 home – but it’s enough to raise eyebrows in Olympia.
House Bill 1042, which gives Goodwill the tax break and is sponsored by Rep. Larry Seaquist, D-Gig Harbor, passed the House overwhelmingly, 90-to-7. A similar bill by Sen. Debbie Regala, however, barely cleared the Senate Ways and Means Committee, with Republicans and Democrats alike questioning the tax shift and whether other nonprofits will be next in line for special treatment.
Regala, a Tacoma Democrat, thinks the proposals are unlikely to survive unless some senators’ minds change.
PAY TO PLAY?
To see that preferential tax treatment sometimes inspires a chorus of “what about me?” lawmakers need look no further than the reaction to another Regala bill.
This one would help athletic leagues, which are supposed to collect sales tax on the fees that teams pay to sign up, according to the Department of Revenue.
Few of them do. It wasn’t enforced much until recently when the department handed tax bills to a few leagues.
Roughly half the state’s leagues are run by cities such as Puyallup, whose sports options for adults include basketball, softball, volleyball and flag football. When revenue collectors audited the city they wanted about $125,000 in back taxes, city manager Ralph Dannenberg said. Now they are holding off on collections until the Legislature weighs in.
Regala and Rep. Kathy Haigh, D-Shelton, filed legislation to free local governments and nonprofits from the tax. Puyallup and Metro Parks Tacoma back the bills, telling lawmakers it’s too big of a hassle for local officials to collect taxes on a constantly changing set of players.
But then there are the for-profit outfits such as the Greater Seattle Hockey League, whose teams span from Kent to Everett and boast membership of 2,000 players.
Manager Andy Cole’s company has been among the few paying the tax, and he told lawmakers it’s unfair to exempt cities and nonprofits but not him.
Opponents’ complaints had an effect: Regala is willing to change Senate Bill 5422 to also exempt for-profit leagues. It wouldn’t add much to the $2.3 million price tag, she says. The problem is defining who’s in and who’s out of the definition of league sports.
“You get down to some really technical stuff about who we define here – is a bowling league the same as a soccer team? Is a marathon the same as a league?” Regala said.
Cole is staying neutral for now on the revisions. But he’s learned a few things about the legislative process on his trips to Olympia.
“I am figuring out that no one wants to pay taxes and loves each and every exemption they can get,” Cole said.
Jordan Schrader: 360-786-1826 firstname.lastname@example.org blog.thenewstribune.com/politics