Gregoire, too, says she's open to eliminating some of the exemptions. "I have worked with my staff to review the tax system to look for loopholes and identify tax preferences that are no longer effective," she says. "I plan to revise some tax preferences, allow some tax preferences to expire as scheduled, and renew selected others that are working." She thinks those changes, if approved, could produce $15.7 million this biennium and $63.7 million in the next.
If so, the governor, Kelley, and other state lawmakers could certainly argue they covered the spread without raising new taxes. They'd be reviving existing ones, and doing something akin to what Oregon voters did last week. They approved taxing wealthy families and corporations, raising income taxes on households making more than $250,000 annually, and hiking the state's corporate income tax.
Jeremy Eaton
Jeremy Eaton
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Even so, the governor and lawmakers so far seem willing to wade into only the shallow end of the exemption cesspool. Comparably few preferences have been yanked or allowed to expire in recent years, and Gregoire is so far moving slowly on her planned repeals.
That's due in part to a lumbering bureaucratic process. The Department of Revenue report—issued every four years—is sort of the starting point. Rep. Kelley's group, the Joint Legislative Audit & Review Committee (JLARC), then steps in with the assistance of the Citizen Commission for Performance Measurement of Tax Preferences (CCPMTP) to review the list.
From that alphabetic nightmare, with input from state auditor Brian Sonntag, emerge some recommendations and legislation.
The JLARC takes a close look at the history, beneficiaries, use, and economic impact of tax breaks. Now and then, change results. But in 75 reviews over three years, the JLARC has recommended 50 exemptions not be changed. Seventeen of them should be re-examined or clarified, it decided. Just eight, worth $9 million, should be terminated or allowed to expire, it concluded.
Among the most recent reports was a January summary of 12 exemptions. Eleven should remain unchanged, the report states. The one break that might be repealed? The one granted to newspapers, allowing them to avoid paying taxes on newsstand and home-delivery sales. It was unclear, the report said, whether a purpose exists for the exemptions "given the changing industry conditions and the 2009 B&O tax preference enacted for newspapers."
At a January meeting of JLARC members, several other encouraging repeal recommendations (if yours is not the ox being gored) popped up. The break to hospitals for buying patient-lifting devices should be allowed to expire, the JLARC staff told members. Same for an exemption to farmers who use machinery, rather than fire, to ready their fields for replanting. A break dealing with rural utility contributions and another for rural software developers both ought to expire, the staff said. Separately, legislators have also proposed some rollbacks, including repeal of the $12 million biennial exemption for the Centralia steam plant.
The CCPMTP, meanwhile, has suggested that the sales-tax exemption granted to janitorial-services firms be done away with. It could sweep in $8 million.
Hearings for some of these proposals are already set, and some measures are likely to make it to the floor, Kelley indicates. The criteria lawmakers might consider, he says, is to repeal any exemptions that have "become a giveaway."
In the eye of some beholders, that's almost all of them. But Greg Devereux, the state employees' federation leader, says don't bank on a tax-break revolution yet. "The exemptions are a perpetual-motion machine," siphoning off more would-be revenue with each new session, he observes, "and no one's willing to step in front of it."
randerson@seattleweekly.com
