"Right now," says Greg Devereux, the federation's executive director, "it seems state workers and teachers are the targets" of budget-cutters. "Our mantra is there should be shared sacrifices. But we're easy targets. Rather than piss off a hundred groups, just piss off two. They don't think they need us to get re-elected."
If they want his vote, Devereux says, they'll sacrifice some tax-exempt fat cats, whose identities are something of a secret in Olympia.
Jeremy Eaton
Jeremy Eaton
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We can't tell you who specifically gets how much in official Washington tax breaks. That's a secret, says DOR spokesperson Mike Gowrylow. "State law prohibits us from discussing the tax situation of any particular company," he says."Just like the IRS won't give me your tax return if I ask them for it."
In addition, it's illegal for the state to extend credit to a single private entity, so when legislators draw up the laws, they come up with more generic identifiers.
Also, if fewer than three would-be taxpayers could benefit from a given break, the DOR usually won't identify the amount of unpaid taxes covered by that exemption. That's because deducing the identity of the company or organization involved wouldn't be much of a challenge, and you could therefore also figure out how big a break they're getting.
A certain "manufacturer of commercial airplanes," for example, gets a $150 million tax break every two years under one of the exemptions. Another $45 million is granted for "Airplane pre-production costs."
The "manufacturer" exemption was passed in 2003 "to encourage the assembly of a super-efficient airplane in Washington." That would be the new 787 Dreamliner, the prize up for grabs in the Boeing Co.'s Best Bribe Sweepstakes, available in the lower 48 states. Victory went to the governor offering the greatest tax breaks and other kickbacks. Then-Gov. Gary Locke threw open our state's safe after hiring Boeing's own consultant to advise him. With lawmakers' approval, he doled out $3.2 billion in exemptions and credits to the Chicago-based aerospace giant, spread over 20 years.
Other Olympia incentives granted to the company and the aerospace industry will ultimately save Boeing an estimated $1 billion more over the years, according to Seattle Weekly calculations. Reversing any of those exemptions would make the company howl and threaten to move to whatever state it hasn't already threatened to move to. But didn't Boeing renege on the deal anyway? Last year it agreed to build a second 787 assembly plant—in South Carolina—after Gregoire balked at handing out any new tax breaks here. Carolina lawmakers approved $170 million in Boeing incentives and exemptions that were quickly signed into law by the state's philandering governor, Mark Sanford. (Just back from visiting his Argentine mistress, he had his own incentive, dangling as he was over the maw of impeachment).
Deferral of state and local retail sales and use taxes are also allowed for the construction of buildings for high-tech projects involving research and development. That has Microsoft and its ever-expanding campus written all over it, allowing MS to avoid sales tax on construction costs, materials, and new equipment, for example. Another 500 small and large companies also benefit, says the state. The exemption was created in 1994 and extended in 2004 for another 10 years. Over a decade, that's $650 million the state is not raking in.
Almost 1,700 high-tech firms also share another $50 million in B&O tax credits for research and development under an exemption that was also renewed in 2004 for another decade. And a $12 million property-tax break goes to companies that use custom computer software.
Microsoft, incidentally, has also avoided paying a ton of state taxes by moving offshore, so to speak. According to writer and ex-Microsoftie Jeff Reifman, Microsoft opened a small Nevada office in 1997 to record software-licensing revenue and skirt Washington's half-percent wholesale tax on software-licensing royalties. Reifman estimates that has helped the company of billionaires Bill Gates and Paul Allen avoid more than $700 million in Washington taxes. With interest and penalties, the total exceeds $1 billion.
Allen, the world's richest sports mogul, gets other breaks here, too. Besides enlisting state taxpayers to help build his Seattle football stadium, and receiving county tax cuts, Allen's Seahawks and the Seattle Mariners have each benefited from sales-tax exemptions on the cost of stadium construction. The franchises, along with the state commissions that operate the stadiums for them, avoided paying around $50 million in taxes over 10 years. Though they've now begun to pick up the tab in annual increments, that's money that could already be in the state's vaults.
Health-maintenance organizations (rhymes with Group Health), along with the major health-care insurers, are exempt from paying almost $300 million every two years in B&O tax on insurance premiums, under a break dating back to 1993. They also don't pay $40 million every two years on Medicare premium taxes that could have gone to the state. The insurers are also exempt from $25 million in dental premium taxes. As of 2006, about 100 unnamed hospitals also get $6 million in B&O credits for buying patient-lifting devices.
Here's a real toughie: A tax exemption is provided to unnamed "Persons who conduct horse racing events that are licensed by the State Horse Racing Commission." Since, as the state reveals in a footnote, "Emerald Downs is the only track currently in operation," we'll guess that's the place they mean. The privately owned track, opened in 1996, is allowed to avoid about $4.3 million in biennial B&O taxes.
