Similarly, "Air pollution control equipment that is constructed or installed at a thermal electric generating facility" is exempt from property tax. That would be the Centralia coal-fired steam plant, worth a couple million every couple years. The plant is also exempt from sales tax on the coal it buys, but because of those confidentiality rules, says DOR, it can't reveal the amount of the exemption. We've learned it's about $12 million biennially, dating to 1997.
The cheap-energy-gobbling "aluminum smelting industry" gets lots of breaks, starting with property taxes. Smelters are effectively reimbursed through a tax credit in the same amount. There are also exemptions on personal property, construction, and use of natural gas, along with credits for pollution control. Again, names and amounts aren't listed. But we learned elsewhere those breaks are worth more than $3 million biennially to the state's two smelters, Alcoa Inc.'s plants in Ferndale and Wenatchee. The property-tax credits, created in 2004, are to expire in 2012, but a bill has already been introduced to extend them five more years.
Jeremy Eaton
Jeremy Eaton
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Under a B&O tax break for advertising sold to out-of-state buyers, radio and TV stations are deducting $2.7 million every two years. The newspaper industry—particularly the publishers who, unlike freebie Seattle Weekly, for example, sell their print product for hard cash on the street or by subscription—get in on the exemptions too. The sales aren't taxed, mainly to "recognize the practical problem of collecting sales tax on individual sales of about a nickel, the typical price of a newspaper in 1935," the DOR report says. "Arguments have also been made in the past that newspaper carriers (mostly youth) should not have to be responsible for collecting and reporting the tax."
Though billing functions have now largely been centralized and computerized by the publishers, and kids delivering papers on their bikes are long gone, the exemptions continue. The Seattle Times, as the state's largest newspaper, presumably gets the largest benefit from the roughly $25 million that publishers (and their print readers) aren't paying over two-year sales periods.
Seattle Weekly and other papers, particularly the Times, benefit from additional media-tax breaks. About a dozen papers in all save a collective $1.2 million on sales taxes when buying new computers, as of 2004. And an exemption passed just last year cut the state B&O tax by 40 percent for newspapers. It was approved as the industry fought off death spasms. Times publisher Frank Blethen pleaded with lawmakers, saying he and other publishers were "hanging on by our fingers," while his rival, the Seattle Post-Intelligencer, folded its 146-year-old print edition. Other publications cut staff and teetered on the edge of bankruptcy. Nonetheless, the exemption means at least $2.6 million less going to the state every two years.
The DOR's exemption list indicates that most every living soul directly or indirectly benefits. About 4,800 insurance agents collectively avoid paying $40 million in B&O taxes on their commissions each biennium. About 450 travel agents and tour operators don't pay $16 million in B&O taxes. When any of us buy prescription drugs, we collectively avoid paying $613 million in sales taxes that have been exempted. It's an exhausting, all-inclusive club.
Legislators are unlikely to touch mass-appeal exemptions. A more likely target could be something like the $1.1 million break given in 1982 to international banking institutions that establish offices here. Similarly, there might not be agreement to reverse a longtime small-boat owners' excise-tax exemption that could produce $4 million. But might lawmakers ding people from out of state who buy a boat here and aren't charged retail sales tax? That's a biennial $10 million exemption.
There's $12 million sitting there from a 2006 B&O exemption given the carbonated-beverage-syrup industry. Since 1993, microbreweries haven't had to pay $3 per barrel in beer excise tax, saving them $7 million every couple of years. Farmers get a bounty of longtime exemptions—more than $200 million in farm-product tax breaks alone. There's also an $89 million break on the feed and seed they buy, and $88 million on fertilizer and chemical-spray purchases. More than $13 million in taxes are not paid on new parts for their tractors and other machinery.
Even chickens benefit: Farmers collectively save $1.4 million on taxes when they use natural gas to heat poultry barns. They avoid paying another $360,000 when buying bedding for their birds.
Fowl as that might sound, however, the issue for Olympia is sacred cows.
Any major exemption repeals would be a course change for the legislature, which has been adding breaks at the rate of more than a dozen each year. Repeal may be in the air, but more than two dozen new exemption bills have already been offered this session. They include breaks to aid seniors and the disabled. But more common are the proposed business exemptions, including new give-backs for rural data centers, medical-equipment firms, electric-car owners, and producers of hog fuel used to generate energy.
Supporters say many of the breaks are needed to counter a sucking economy and rocketing unemployment. But that's also an argument for repealing some of that $15 billion jackpot, says Rep. Kelley, the exemptions-review committee chair.
"In this tough economic climate, we realize that we are competing with other states and need to make sure we create a climate to help make Washington businesses successful," he notes."On the other hand, we are not in the business of giving tax breaks to one group at the expense of another group or the public at large."
