House Democrats are working on short- and long-term solutions to fulfill our constitutional obligation to fully fund education. To meet this obligation, we’ll need to invest an additional $2 billion into K-12 schools next year and another $2 billion in 2017. That’s $4 billion in new funding for education in the next three years.
The McCleary decision was a game changer that requires us to change the way we approach school funding. One thing is for certain – we are not going to reach that $4 billion goal by making small budget tweaks and cutting existing programs. Additional revenue must be part of the solution.
One sensible approach to generating additional revenue is to close some of the 650 tax preferences we have on the books. This week, the House will be considering an option to repeal four of those tax preferences to help pay for our public schools.
These particular tax preferences are costly, ineffective, and are not good deals for Washington taxpayers. We’ll go into more detail with each of these preferences on this blog over the next few days.
Extracting funding from closed oil company preference
The first preference we’ll take a look at is an unnecessary tax exemption on oil used by oil companies in the process of extracting or manufacturing.
It was originally enacted in the 1940s to help the wood products industry. Today, the vast majority of the beneficiaries are the big oil companies. It’s a perfect example of a tax benefit that’s not going to the intended recipient.
Removing this tax preference will not hurt the oil industry in the slightest. It simply removes an unnecessary bonus given to an industry that needs it least—an industry in which the top five companies made $23.1 billion in profit during three months last year.
According to the Shell annual report, that company alone generated more than $467 billion in revenue in 2012. That doesn’t sound like an industry that relies on Washington state tax preferences to stay afloat.
Closure of this tax preference for big oil companies, along with the other proposed closures, would raise about $309 million through 2017.
As Rep. Reuven Carlyle often says, budgets are moral documents. They’re about choices and priorities. Do we continue giving oil companies a tax break or do we lower class sizes for our students? Which choice would you prefer?
Check back on this blog this week as we take a closer look the other three tax preferences on the table for discussion.