• Tax Expenditure Reports:  A Tool for Transparent, Timely Budgeting - A New Policy Brief from the Washington State Budget & Policy Center (February 2007)

• Adding Up: New Tax Breaks in Washington 2004-2006, Report from EOI (December 2006)

• 2007 Legislative Priorities, Washington Tax Fairness Coalition (January 2007) -- includes a "big picture budget" bill

A HALF BILLION IN NEW/EXPANDED TAX BREAKS WON’T BE WEIGHED AGAINST HIGH PRIORITY PUBLIC INVESTMENTS IN THE STATE BUDGET

Why the fade out?  What can we do to change this?

The Legislature approved at least 61 new or extended tax break packages during the last three years alone that will cost the state nearly half a billion in the 2007-2009 biennial budget, according to a new report released by the Economic Opportunity Institute and the 70+ member Washington Tax Fairness Coalition. 

When the Governor put out her budget proposal, a vital piece of the picture was be missing,” says the Coalition’s Executive Director, Barb Flye.  “Nearly half a billion in new and extended tax breaks has been spent even before the budget is proposed,” she explained. 

The cost of these tax breaks is not being evaluated side-by-side against other high priority public needs like affordable health care, quality education and transportation in the budget process, and that’s just plain wrong.  The Tax Fairness Coalition is calling on the Governor and the Legislature to build on their existing record of improved accountability and transparency by requiring tax break spending reports as part of the state budget. 

UPDATE:  A new bill to require a tax expenditure report with the budget has been introduced in the Senate - SB 6054 (Pridemore) - with 19 sponsors.  Meanwhile the House Bill 1827 (Santos) was heard last week before Finance Committee, where the Coalition and four partner organizations testified in favor, and six-pages of organizations signed in supporting the bill!

Policymakers should have the whole picture, and should be required to weigh the possible benefits of tax breaks directly against other investments we could be making to strengthen our economy and improve our quality of life in Washington State. 

The research

The report -- “Adding Up” -- was compiled by Marilyn Watkins, Ph.D., the Policy Director for the Economic Opportunity Institute, which is part of the Tax Fairness Coalition.  “It is startling to discover that nearly half a billion in revenue has been spent on new and extended tax breaks in just the past three years, and that’s just the tip of the iceberg,” according to Dr. Watkins.  “There are over 500 tax exemptions, deductions, credits and other tax breaks on the books in Washington State.” 

Often the full fiscal impact of new tax breaks isn’t felt until future budget cycles.  For example, the B&O business tax credit for soft drink syrup taxes cost roughly $2.3 million in lost state revenue in 2005-2007, but will cost the state over $21 million in lost revenue by the 2009-11 budget cycle.  We already have a problem with tax revenues growing more slowly than the economy and the demand for public services. Cutting our tax base makes this imbalance even worse. 

It’s time to start thinking about economic development in a new way. Providing high quality public services is the best way to build the future of our state.

We need to ask the tough questions as part of the budget process about whether those funds could have been invested more effectively, in ways that would help all Washington businesses and residents. 

Many of the lobbyists for tax breaks claim they will generate more jobs, yet literally hundreds of studies across the nation done over the past two decades have failed to prove that higher tax subsidies create more jobs.  In fact, the evidence suggests that funding high quality public services like education is a better way to create a vibrant economy.

The trade-offs -- like education and health care

Dave Scott, Vice-President of the Washington Education Association -- another Coalition partner -- added: “The Governor certainly deserves credit for proposing about $200 million to help students struggling with math and science in her about-to-be-released budget, but we need to look at whether tax breaks really do more for Washington’s families and its economy than a full investment in a well-educated 21st century workforce.” 

Linda Sternhill Davis, a grassroots leader with Coalition partner Washington Community Action Network said affordable health care has long been a priority for her organization.  Davis relates:  “Our 50,000 members have consistently been told that greater gains in affordable health insurance aren’t possible because ‘there isn’t enough money in the budget.’”  

“Yet this report shows that there was more funding that could be invested in health care, rather than on new and extended tax breaks outside the budget process.”  For half the value of the new tax breaks, we could provide affordable, cost-effective health insurance to 60,000 more adults and cut the number of uninsured in our state by over 10 percent.

Coalition to governor, legislature:  pass a "big picture budget" bill in 2007!

The Governor the Legislature worked together to create a citizen’s commission to review existing tax breaks, approving a bill that was the Washington Tax Fairness Coalition’s top priority for 2006. 

The Coalition is urging the Governor and legislators to build on that important step toward greater accountability in 2007 by requiring that the fiscal impact of all tax preferences be reported as part of the budget and judged in context.  We need the full picture in real time in order to make the best decisions about how to invest our public resources.