It took far longer than expected, but several months ago the 2013 Legislature approved a new state budget that begins to address the Supreme Court’s McCleary decision while protecting vital state services.
That agreement resolved, for the time being, disputes over preferential tax rates and exemptions that bedeviled the budget talks for weeks. There are hundreds of these tax breaks in effect, covering everything from a sales-tax exemption for food sold at the supermarket to a business-tax break for travel agents.
House Democrats approved a bill by Rep. Reuven Carlyle of Seattle to close or narrow several outmoded and obsolete exemptions in order to provide more money for K-12 education.
But the Republican-controlled Senate resisted, and actually wangled 16 new or extended exemptions included in the final budget deal.
But Carlyle was able to get some of his tax preference reforms into law. In the Senate bill creating the new exemptions, he inserted provisions that:
- Set a 10-year “sunset” for new exemptions, unless specified otherwise.
- Require the Legislature to declare the extent of a new exemption, and to specify how to measure if that intent is realized.
- Open to public disclosure the amount claimed by individual businesses in exemptions.
- Require companies that claim a specific sales-tax exemption for a kind of biofuel used in energy production to pay the state the value of the exemption from the previous two years if they shut down operations, costing a loss of jobs.
Carlyle also pushed successfully for creation of a five-member task force to recommend what measurements to use in judging the effectiveness of preferences.
Meanwhile, two agencies already review tax exemptions: the Joint Legislative Audit and Review Committee and the Citizen Commission for Performance Measurement of Tax Preferences. Previous recommendations by those agencies to end preferences formed the basis for the House Democrats’ loophole-closing efforts.
In a report last month, JLARC additionally recommended that the Legislature end one exemption and review several others.
The Citizen Commission is meeting Sept. 20 to hear testimony on the new JLARC recommendations and on other tax preferences under review.