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

COALITION CALLS FOR GREATER ACCOUNTABILITY

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 today by the Economic Opportunity Institute and the 70-member Washington Tax Fairness Coalition. 

“When the Governor puts her budget proposal out tomorrow, a vital piece of the picture will 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,” she asserted.  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. 

“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,” Flye explained. 

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,” stated Watkins.  For example, the B&O 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. 

 “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,” Watkins said. “Many of the lobbyists for tax breaks claim they will generate more jobs,” she elaborated, “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.”

Dave Scott, Vice-President of the Washington Education Association -- another Coalition partner -- agrees: “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,” said Scott, “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 21^st century workforce.”  Watkins concurs: “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.”

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,” Davis explained.  “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,” she stated.

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.  “We urge 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,” said Flye.  “We need the full picture in real time in order to make the best decisions about how to invest our public resources,” she concluded.

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