OLYMPIA — Legislation introduced today would phase-out most tax preferences and exemptions for the state’s Business and Occupation (B&O) and Sales and Use taxes over the next eight years, saving the state an estimated $8 billion in tax revenue.
Sen. Jeanne Kohl-Welles, D-Seattle, the prime sponsor of Senate Bill 5857, is working with Rep. Reuven Carlyle, D-Seattle, who has been examining the issue for months, to bring greater transparency to the flow of state dollars by gradually eliminating tax breaks and making review of tax exemptions part of the biennial budget-writing process.
“Now is the time for reform not only of our spending, but of our tax policies,” Carlyle said. “Tax exemptions should be forced to go through the process of representative democracy once in a while, just as spending decisions are made every two years in our state budget. It’s not about raising taxes or lowering taxes, it’s about the courage to be philosophically consistent in how we tackle tough budget challenges.”
Senate Bill 5857 proposes to eliminate all tax preferences that are not bound by the state constitution or already scheduled to expire. The preferences would be eliminated over four stages, beginning July 1, 2013, with the first stage of eliminations mostly including exemptions for business, and subsequent stages gradually eliminating tax preferences for nonprofits, government transactions, household consumption, health-care items, and low-income households. The legislation would also require a fiscal summary of all tax exemptions to be included as part of the Governor’s two-year budget proposal.
“I commend Rep. Carlyle for coming forward with the concept for this legislation,” Kohl-Welles said. “When we’re forced to make decisions between cutting health insurance for low-income families and fully funding our K-12 education system, I think it’s only fair that we also look at state spending in the form of tax breaks to special interest groups. Our taxpayers deserve to see where the money goes, especially in a budget climate where we’ve already cut roughly $5 billion from social services and education in the last two years.”
The bill has been referred to the Senate Ways & Means Committee.