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Afternoon Jolt: Tax Break Version

Jolt   July 27, 2011 at 5:13 pm Afternoon Jolt

The Joint Legislative Audit and Review Committee (JLARC), the committee of state senators and representatives that reviews tax breaks to see if they’re working, released its report late last week.

Of the 25 tax breaks they looked at—worth $2.3 billion—they decided three, worth a total of $44 million, should expire.

That brings us to today’s loser: Renewable energy.

The JLARC decided to let a sales tax exemption, worth about $41 million, on equipment used for generating renewable energy, including wind, biomass, and tidal energy, expire.

Their reasoning? The break was intended to be temporary and there were no measurement goals in place.

They also recommended letting a $3.2 million tax break for “hog fuel”—wood chips used for fuel—expire. They reasoned that the break was initially put in place when oil and gas prices were low and believe the break—intended to make hog fuel competitive—is no longer necessary.

Again, they note that the legislature did “not provide performance goals to guide  … assessment of performance.”

And this brings us to today’s real loser: The taxpayers.

As lefty think tank Washington Budget & Policy Center notes about the JLARC recommendations, the committee’s frame is limited. Their only metric is to look at the goal of the tax break, as opposed to judging the worthiness of that goal. It’s a bit like asking if McDonald’s provides a quick, cheap dinner without asking if it’s good for you.

Furthermore, even if a tax break is working—and is even if it’s a good thing—shouldn’t it be considered against other priorities, such as  education, health care, and public safety, when it comes time to weigh what’s funded and what’s not?

There are roughly 300  tax preferences on the books worth about $6.5 billion annually. We’ll give those, like the tax break for big banks on first mortgage loans, today’s winner.


  • Mikos

    I got stuck on the cake.

  • Mikos

    I got stuck on the cake.

  • Josh Feit

    That was a bit clunky. Re-did that graph. Hopefully it makes more sense now. 

  • sarah

    By “what’s funded” do you mean what tax breaks are given to a particular constituency, in the sense that we are funding their tax breaks?  It would be really difficult and time-consuming (and probably impossible) for whatever legislative committee that reviews these to make judgments (i.e., come to a consensus) about the qualitative societal worth of any tax break.   

  • Anonymous

    Hi Bizzaro World.  A $41M state tax giveaway to non-viable business sectors with further duplication, inefficiency, and waste at the federal level, is ended and the taxpayers are the “real loser.” 

  • http://jabailo.tumblr.com John Bailo

    Really the only “green” technology which has been taken up by commercial industry after decades of Government subsidies are fuel cells powered by Hydrogen.   The major auto manufacturers are planning the release of production models as early as 2014.   So, George Bush’s 8 year long Hydrogen Initiative is the thing that saves this planet. All the rest you can chuck out the window.

    Mercedes Advances Fuel-Cell Launch Date to 2014
    http://www.autoobserver.com/2011/06/mercedes-advances-fuel-cell-launch-date-to-2014.html

  • Maralyn Chase

    The development of a new  industry requires a market demand for the product.   The legislature recognized that fact by crafting  tax preferences that  are higher for Made in Washington solar systems than solar systems made elsewhere. .  Do they work?  Yes!   We now have a manufacturer, Silicon Energy,  in our state.  One factory does not make a large industry but more factories are coming because of the market demand for the Made in Washington  product. These are not permanent incentives but rather, an effective start-up boost for a new industry.     It is premature to suggest removing these tax incentives from our economic development tool basket. They produce a net benefit to the state

    Contractors are hiring workers to install these systems all over Washington –  workers who spend their money and pay sales taxes  to replenish the state’s general fund.   If tax incentives don’t produce a net benerfit to the state with  increased tax revenue and job creation,  we should “Claw Back” the foregone state revenue. 
     
    You can read the new report on tax preferences  and the 51 page power point:   http://www.leg.wa.gov/jlarc/

  • Loraleim

    The biomass and hog fuel breaks absolutely should expire. Big industry is pushing “biomass” electrical generation. The only thing “green” about it is the money that the industry will rake in (thanks, taxpayers!) and the trees that used to be growing. Those smoking behemoths burn in seconds what it takes 50 to 80 years to “renew”, and they put hundreds of thousands of pounds of toxic pollutants into the local air every second, every day, all  year. Here are some calculations of the disaster that biomass incinerators will be for our forests: http://massenvironmentalenergy.org/forestry.html

    When they run out of “waste” trees, they go for whole trees and construction and demolition debris.
    Don’t cut the trees, cut the biomass subsidies.

  • http://jabailo.tumblr.com John Bailo

    Must read for all urbists:

    California Wages War On Single-Family Homes

    ...The new legislation’s goal is to cram future generations of Californians into multi-family apartment buildings, turning them from car-driving suburbanites into strap-hanging urbanistas.

    That’s not what Californians want: Some 71% of adults in the state
    cite a preference for single-family houses. Furthermore, the vast
    majority of growth over the past decade has taken place not in
    high-density urban centers but in lower-density peripheral areas such as
    Riverside-San Bernardino.
    Yet popular preferences mean little in a state where environmental
    zealotry increasingly dictates how people should live their lives.

    [...]

    Perhaps the biggest weakness in the analysis lies with long-term demographic factors. As I wrote last week, many of the “young and restless”
    folks whom city planners try to court tend to move into suburbs and
    affordable low-density regions as they grow older and begin starting
    families. Similarly, the vast majority of boomers, according to AARP,
    want to remain in their old homes as long as possible. Most of those
    homes are located in suburban, low- to medium-density neighborhoods.

    There’s a whole lot more density-iconoclasty in this article which I hope you’ll read!

    http://www.newgeography.com/content/002357-california-wages-war-on-single-family-homes?source=patrick.net#main

  • Anonymous

    It’s not uncommon for JLARC to recommend closing tax exemptions – like they did with the first-mortgage exemption enjoyed by banks. Once WaMu went under, that exemption became unjustifiable (as if it wasn’t before) – but a 2/3 supermajority is required to end any tax preferences.

    It’s unlikely any of them will be ended if the 2/3 requirement isn’t lifted, but I think some R’s may like to vote against green energy. Just depends on who benefits from the tax exemptions, and who their lobbyists is…

  • Diogenes

    Density is not necessarily urban.  I spent some years of my childhood in an apartment complex some kilometers outside of the urban center, built around a central park with underground parking.  As a result, the community preserved greenspace, and I had a much bigger backyard than I would have had if all the residents had resided on their own little fenced-in plots on some cul-de-sac.  And density meant the residents didn’t have to walk as far to the local train station for a ride downtown. 

  • Diogenes

    Density is not necessarily urban.  I spent some years of my childhood in an apartment complex some kilometers outside of the urban center, built around a central park with underground parking.  As a result, the community preserved greenspace, and I had a much bigger backyard than I would have had if all the residents had resided on their own little fenced-in plots on some cul-de-sac.  And density meant the residents didn’t have to walk as far to the local train station for a ride downtown. 

  • Perfect Voter

    Looks like all statutory tax exemptions and special favors should be sunsetted from the beginning, after, five to seven years. Let the beneficiaries come back and ask for an extension if they deserve it, otherwise it expires.

  • sarah

    A number of groups have been for years pushing sunsetting of tax exemptions but the Legislature as a whole has never been interested — even pre-Tim Eyman.