Opinion Columns & Blogs

Governor and Legislature must close tax loopholes to save vital programs

The governor and the Legislature must choose whether to protect tax breaks for well-connected special interests or do further harm to the old, the poor and the sick. This will be the central issue when the legislative special session convenes Nov. 28.

Washington’s preference-ridden, consumer-dependent and regressive tax system continues to lag in generating forecasted revenue. Of course, the fundamental cause of the shortfall is the Great Recession triggered by the merchants of greed at the Wall Street casino, and the insufficient response from a national government, hamstrung by a passionate minority committed to blocking effective action.

Compounding these problems, Washington state voters and political figures made things worse by responding with vast reductions ($10 billion over the past three years) to education, health care and human services. These policies caused harm to fellow citizens, caused thousands to lose jobs, sent billions of dollars in lost matching funds back to the federal government and made economic recovery more difficult. These reductions seriously damaged our prospects for future prosperity.

As we tackle this newest revenue shortfall, instead of telling 6,000 elderly and disabled people to buck up and take care of their own needs, thousands of poor people to endure their dental pain, thousands of schoolchildren to learn as best they can in larger and larger classes, and thousands of workers to apply for unemployment benefits, we should first look at repealing a long list of tax breaks that have been won by the powerful in Olympia.

Several of the most notorious are the business and occupation (B&O) tax exemption for out-of-state banks (worth about $85 million per year), and the sales tax exemption on custom software (worth about $130 million per year). For a more complete list of tax loopholes, go to the website of the Economic Opportunity Institute at eoionline.org.

Some will argue that closing loopholes will not yield sufficient revenue to meet a $2 billion shortfall. None can argue, with a straight face, that such actions would not be a good start.

For example, if just the two loopholes described above were closed, it would be enough to buy back $218 million in additional cuts in Medicaid services that the governor has suggested. Moreover, this would generate an equal amount in matching funds from the federal government. So by closing about $200 million in dubious loopholes, we can maintain about $400 million in essential services and keep this money circulating in our economy. We also save thousands of jobs for people who will be able to feed their families and support our small businesses.

Others will argue that it will be hard to get legislators to take the required tax vote to repeal these breaks. While it may be hard to vote against the well-connected, and to defend against the tax attack ads that will surely come in the next election, it is not nearly as hard as an elderly or disabled person knowing that their home care aide will not come today to help them with their toileting needs or to help to turn them to prevent bed sores.

Enough is enough. The time has come for the governor and the Legislature to make the smart choice from an economic perspective, and the decent choice from a human perspective. All of us need to let our elected representatives know that we want them to raise needed revenues in a way that more fairly shares the burden. You can reach the governor and your legislators with a brief phone call to 800-562 6000.

Jerry Reilly is chair of the ElderCare Alliance and former assistant secretary of the Department of Social and Health Services. He can be reached at 360-561-4212 or at jerryreilly@msn.com.