The House supplemental budget proposal included a package of education investments that will bring the state closer to meeting its McCleary education goals, drawing funds from the closure of four costly and unnecessary tax exemptions. Earlier, we focused on the elimination of the sales tax exemption for nonresidents, an arbitrary tax break that denies our state due taxes for Washington goods and services—taxes that could be used to fund our children’s education.
Prescription drug resellers
In 1998 the legislature wanted to attract prescription drug resellers to build warehouses in
our state, bringing jobs and the revenue that comes with the pharmaceutical industry. At that time, competition from in-state distributors and the state B&O tax presented out-of-state companies with a competitive disadvantage.
So the legislature offered a reduced B&O tax rate for business that warehouse and resell prescription drugs in our state.
While the tax break was intended to encourage drug companies to build warehouses in Washington, it missed its mark. Because of a flaw in the structuring, more than 11 percent of the companies that benefit from this tax preference aren’t even located in Washington—they are out-of-state companies that haven’t built warehouses here, haven’t brought jobs here, yet are benefiting from paying less tax than their competitors.
Even worse, this tax break isn’t protecting jobs at smaller companies that need a leg up to compete—instead, this loophole’s greatest beneficiaries are three multinational drug corporations. Does an international drug company need to benefit from a Washington tax break?
Closing this loophole would give us $15.6 million the first year and $29.9 million in the 2015-2017 biennium to invest in education.
So, do we give a tax break exploited by international drug companies or do we give a much-needed cost of living adjustment to our teachers?
It’s important to stay informed on what we’re doing to fulfill our paramount responsibility of funding education right—come back tomorrow to find out what else stands in between us and our goals.
Funding education with closed tax loopholes:
- Closing the extracted fuel tax preference for oil companies
- Collecting sales tax for Washington goods sold to nonresidents
- Eliminating the lower tax rate for prescription drug resellers