The rollout of a House budget bill that cuts $4.4 billion from state programs brought thousands to Olympia last week with a simple message: End tax breaks.
In protests at the state Capitol that grew from about 80 people on Tuesday to an estimated 7,000 to 12,000 on Friday, unions, immigrants, home-care workers and others called on legislators to find new revenue sources before they cut services.
But lawmakers say ending tax exemptions is not as easy – or necessarily as appealing – as it sounds.
“I strongly support closing tax loopholes, but that’s easy for me to say because I come from one of the most liberal districts in the state,” said Sen. Ed Murray, a Seattle Democrat and chairman of the Senate Ways and Means Committee.
He pointed out that voters in most Washington districts turned down proposals to raise taxes in the fall, with only one county in the state supporting a proposal to add an income tax for high-earners and two voting for a measure that would have taxed bottled water and soda. Murray said that meant it would be hard to find the votes for any proposal to increase taxes this session.
Much of that challenge comes from November’s Initiative 1053, which requires a two-thirds majority of the Legislature or a vote of the people to raise taxes in Washington.
Throughout last week in the run-up to Saturday’s passage of the House budget bill, protesters argued that state politicians should stop saying the two-thirds requirement ties their hands and at least try to get enough votes to pass a proposal to raise revenue before they cut social safety net programs such as Basic Health.
Nicole Miller, a member of the Olympia Coalition for a Fair Budget and one of the leaders of Tuesday’s protest, said she would rather see legislators try to pass a bill that would end tax exemptions and fail than do nothing at all to address them.
“We want to see lawmakers work on closing them rather than just throwing up their hands,” she said.
BILLIONS IN BREAKS
According to the most recent count by state Department of Revenue, Washington has 567 tax exemptions on the books amounting to about $98.5 billion dollars per biennium in taxpayer savings. But many of those are meant to benefit consumers more than corporations, said Revenue Department spokesman Mike Gowrylow.
He pointed out that the state does not tax food, for instance, or the money in people’s bank accounts, and taking away tax preferences could have unintended consequences for citizens.
In 2006, the Legislature passed a law that set up a 10-year review process for all tax exemptions in Washington to see whether they were doing what the state intended.
In response, the Joint Legislative Audit and Review Committee has gone through about half of the state’s tax exemptions to date and made recommendations to the Legislature about whether to terminate tax preferences, allow them to expire or keep them, said committee auditor Keenan Konopaski.
Since 2007, the committee has recommended that the Legislature terminate five tax preferences and allow nine others to expire. Lawmakers have not terminated any of the recommended exemptions, but they did allow four to expire, according to JLARC data.
That record, said Sen. Jeanne Kohl-Welles, a Seattle Democrat, shows one of the weaknesses with the existing review process – lawmakers are free to ignore the committee’s recommendations.
Kohl-Welles said her proposal, Senate Bill 5857, would address the problem by adding expiration dates to about 300 tax exemptions , requiring lawmakers to evaluate each one if it’s to continue.
The advantage of that proposal, she said, is that it would remove the two-thirds barrier that lawmakers currently have to deal with when they want to end a tax exemption, though it would take a twothirds majority to pass the bill in the first place.
If it did pass, the measure would not go into effect in time to mitigate the state’s $5.1 billion shortfall for the upcoming biennium, but the Office of Financial Management estimates it would bring in about $2 billion in the 2013-15 biennium.
Democrats said the reason tax exemption bills face such a tough fight is that Republicans won’t give them the votes they need for a twothirds majority, but so far Democratic leaders have not tried to bring bills that would add taxes to the floor.
Kohl-Welles’ proposal, along with several other bills to eliminate tax exemptions, such as House Bill 1847, which would fund Basic Health by raising taxes on plastic surgery, private jets and coal, have not been scheduled for a committee hearing.
Republicans in both the House and Senate promise to oppose any measure that would raise taxes if it came to a floor vote. Senate Republican leader Mike Hewitt of Walla Walla and Rep. Richard Debolt of Chehalis, his House counterpart, both said they did not think any Republicans would vote in favor of bills to add taxes, though they might support user-fee increases.
Rep. Ed Orcutt, R-Kalama, said the tax exemptions the state has are there for good reason and taking many of them away would result in job losses for the state.
“The tax exemptions that we have went through a very deliberative process,” he said. “At this point they may not be creating a lot of jobs, but they sure are protecting a lot of jobs.”
Kohl-Welles said, though, that she thought the recent protests in Olympia might stimulate more legislative action to roll back tax exemptions, and lawmakers had been talking more about sending a ballot measure to raise taxes to the voters in November.
Murray said he planned to have a hearing in his committee on some of the bills to end tax preferences, including Kohl-Welles’ proposal, but it would be a tough fight even to find the 25 votes the Senate would need to get a tax increase to the ballot.
Speaking to reporters while protesters shouted outside her office window, Senate Majority Leader Lisa Brown said the Senate budget, which will probably come out Tuesday, won’t count on any new tax revenue. She said, though, that Friday’s protest was the biggest she’s seen in years, and could eventually lead to a shift of legislative opinion in favor of more taxes.
“Within the space of one year or two years what’s a priority for the people of Washington State can change pretty dramatically, and the kinds of bills that can pass can change pretty dramatically,” she said.