We didn’t run our Guest PubliCola Op-Ed on Sunday because this week’s guest writer, Remy Trupin, Executive Director of the Washington Budget & Policy Center, had a “news peg”—HB 6853, which got a hearing Wednesday in the Senate Ways & Means Committee.
Take it away Mr. Trupin.
If any enduring good is coming out of the efforts of state officials to deal with the billions of dollars the recession has cost the state, it’s this: The stark reality of making $3.6 billion in cuts last year and facing a new $2.8 billion shortfall this year has finally forced them to look at billions of dollars of tax exemptions doled out years if not decades ago and allowed to persist with little public scrutiny.
Lawmakers are looking to eliminate a bunch of these exemptions this year, from tightening up what multistate companies get a pass on B&O taxes to an exemption forgiving visiting Oregonians from paying our sales tax.
The gamut of giveaways and loopholes represent hundreds of millions of dollars that could have been spent on things like educating children, protecting our most vulnerable, and protecting the environment.
Though its prospect is uncertain during the special session, there could be even more important reform. The Senate Ways & Means Committee on Wednesday discussed a measure ( “The Tax Preferences Act of 2010”) which mandates that every tax exemption sunsets after five years, new ones would have to be justified when created, they would be measured to see if they help, and while they exist they would have to be justified. Fundamentally, it recognizes that tax exemptions have the same effect on the budget as spending hundreds of millions of dollars.
And make no mistake, tax expenditures is spending by another name. A lot of spending. In total, we will forego $13 billion of tax revenue in the coming two year budget cycle because of tax exemptions ($1.6 billion from those passed since 1995 alone).
But while every penny that goes to children, the elderly or the poor is anguished over in the budget process, tax preferences receive hardly any scrutiny.
If the bill passes, though, tax expenditures would no longer just be created and forgotten, only to deprive funding from priorities like education.
In 2006, Washington’s Legislature did create the Joint Legislative Audit and Review Committee (JLARC) to conduct an extensive review of each tax expenditure based on predetermined calendar and make recommendations about continuing or altering most of them. (Some were excluded from consideration). A citizen’s commission then reviews JLARC’s report and makes independent recommendations to the Legislature. Unfortunately, JLARC’s review process hasn’t resulted in many changes.
The budget debate this year seems like it’s all about bad choices. Here’s a good one.
Remy Trupin is the Executive Director of The Washington State Budget & Policy Center, an independent, nonprofit think tank that specializing in analyzing and offering solutions on state fiscal policy. For more information, go to http://budgetandpolicy.org/.
