Yesterday I went down to Olympia to support legislation that would authorize State Auditor Brian Sonntag to conduct independent, comprehensive performance audits on state agencies. Today I am heading back to the Capitol to support legislation that provides similar oversight of tax exemptions.
The House Finance Committee is meeting at 1:30 today for a public hearing on HB 1069, HB 1094, and HB 1096. It’s time we demand the same kind of accountability from tax exemptions as we do from other government programs.
With the Legislature struggling over whether to raise some taxes in their efforts to close a $1.6 billion budget gap, one thing neither party seems to want to discuss are the billions of dollars of tax exemptions currently in place — an amount that actually exceeds the size of the budget itself. And of course, much of the lobbying that goes on in Olympia, is on behalf of millions of dollars in new exemptions.
If people like Tim Eyman really cared about giving taxpayers the most bang for their buck, he’d be down there with me, fighting to assure that our existing tax exemptions are actually producing the social and economic benefits that they promised. Otherwise, all this talk about performance audits on government expenditures, while allowing zero accountability on “tax expenditures”, comes off as just a load of partisan hooey.
I’ll post a full report tonight.
whats the difference between the bills???
who cares anyway
Good for you Goldy! I’m assuming you are talking about the targeted tax exemptions like the sweetheart deal with Boeing. This is one area that I am in 100% agreement with you. Quite frankly, I don’t see why these types of tax exemptions even exist. Taxes should be used for raising the necessary revenue to run government functions, period. Using the tax code for social engineering, to stimulate the economy, or for any other magical purposes is the essence of tyranny. The mere fact that there is such a program is proof positive that the entire tax structure is way out of whack. What we need to do is completely eliminate all such sweetheart deals and then reduce the tax rate across the board accordingly.
A number of states have been dealing with this issue. Basically legislaters around the nation are simply demanding that “supporters of those tax breaks should have to prove that the breaks have allowed them to create jobs and spark economic development.”
http://www.theolympian.com/hom.....0211.shtml
(Scroll down to the section titled “Exemption benefits”)
There have been a number of proposals in different states recently that are tying some kind of “performance assurances” to the tax exemptions. Seems like a reasonable idea. If somene gets a tax break claiming they will create jobs, they should actually create jobs, not just enrich their CEO and board of directors. Or we should review other tax breaks to ensure they still serve the original purpose (like CT ruling that Mel Gibson can’t dodge property taxes in CT by putting a couple of pigs on his property and calling it a “working farm”).
And all states are being held hostage by large businesses that essentially extort sweetheart deals out of the states by threatening to move somewhere else. Sports teams have been doing the same thing for a while. I don’t know what the answer is, because I don’t want to lose big businesses (or sports teams), but at a certain point the state is essentially paying more for the jobs that it keeps than those jobs/companies generate in tax revenue (even if you extend out the revenue to associated businesses/spending).
BTW Doug, your argument is at the core of the support for what Steve Forbes’ called a “flat tax”. Some other people have argued for similar taxes that are mildly progressive, but similarly have no exemptions at all (none for businesses, none for all the children you have, none for your mortgage). Equal treatment for everyone. If implemented right (lower rates for everyone at the bottom/middle, higher rates at the top) , it might not be the worst idea in the world :)
Goldy, where do you stand on the sales tax exemption for services? That is the biggie.
Goldy–while you’re there check into Senate Bill 5113! WOW! What is this? Talk about a waste of time and money in the Legislature.
Billions of dollars in tax exemptions? Bullshit!
You only get there by calling “exemptions” a whole host of things not taxed, then add in the exemptions that would never be touched. This mythology has been exposed time after time, but you liberals keep talking as if this fantasy was real.
Lets start with services. They are NOT exempt from sales tax- they are not taxed. That is a significant difference, not that liberals would recognize it.
How about the exemptions from sales tax for food and medicine? The property tax exemptions for charitables and non-profits?
Goldy- don’t start talking of billions, until you are willing to list billions you would be willing to support. Bet you can’t.
Jim, I look at services as exempt only because we escaped sales taxation last time the demos tried it. I think it was Lowry but not sure, seems to me Locke was the budget director when it was proposed. The dollars are enormous. Don’t be surprised if this particular lead balloon sails again sometime soon.
I’m all for accounability, but are performance audits really going to get us there? I can see it turning political very quickly. Who sets the standards to measure against?
Example: how do you measure the success of the state welfare program? Number of people in the system? Is a higher number better or worse?
Performance is highly subjective. In business, the bottom line sorts out the performance. I’m not sure how govt gets measured in a way that everyone agrees on the measures.
Jim, just came back, and I’ll comment more later, but if don’t like me calling them tax “exemptions” that’s nothing compared to Orcutt’s reaction when I called them “loopholes.”
What would you prefer… I do like the the Legislature and call them tax “preferences”, a phrase that means absolutely nothing to voters?
But it’s all besides the point. These bills don’t eliminate a single preference/loophole/whatever. The simply create more disclosure, and require that these tax “thingies” be reviewed every so often to make sure they are producing the the social and/or economic benefits promised.
What is so wrong with that?
Yes! Goldy, a good idea – – – Are our existing tax exemptions actually producing the social and economic benefits that they promised? There should be a periodic review process which take into account the various promisses the particular exemptions promised. Let’s get a businesslike accountability from these proprosals. What’s the ROI?
God, Goldy, you just reek of “government is good, buisiness is bad so government should tax the hell out of buisiness” smell. You see the whole problem with performance audits either your (HB1064 I get the drift you support) or Eyemans ideal of audits, is both versions leave the fox in charge of the hen house. In real life if a buisiness is audited by the IRS, they dont tell the IRS “we did an internal audit and everythings cool” no the IRS says bring in your books and WE will audit them…get it? We need outside audits.
There are some things I stridently disagree w/ Dino Rossi on. One of them is asking questions about these tax exemptions…
Thanks Goldy!
These bills don’t eliminate a single preference/loophole/whatever. The simply create more disclosure, and require that these tax “thingies” be reviewed every so often to make sure they are producing the the social and/or economic benefits promised.
What is so wrong with that?
Comment by Goldy— 1/19/05 @ 5:21 pm
Absolutely nothing.
Chuck… did you bother to read the bills? I provided links.
HB 1064 creates a Citizen’s Oversight Board to work with the State Auditor’s Office in prioritizing and conducting independent audits of government agencies and accounts. It also requires that the Auditor to contract outside auditing firms to actually conduct the audit (though the Auditor oversees them.) This is not an internal audit.
So tell me… how is this the fox guarding the henhouse?
As to HB 1069 (performance audits of tax “preferences”)… the only reason I can see for opposing this bill is if you are afraid that a performance audit might show that some of these exemptions are not returning more than they are costing.
These are both good government measures.
Comment by Goldy— 1/19/05 @ 8:40 pm
No, a more realistic scenario to be afraid of is that the point Jim King made above is forgotten by the Democrats in charge of the state: many of the conventionally defined “exemptions” that are looked at are actually non-taxed thingies. And the result of an “audit” of a so-called exemption will be a drumbeat to “close the loophole!”
Take the sales tax on food or services as an example. The revenue from these would be so staggering that it would be hard for the audit to justify not taxing these. With Democrats so solidly in control, this tool could be misused to justify tax increases such as these.
Zip… I would support extending the sales tax to business and professional services, as a stop gap measure. But what we really need is restructuring.
Goldy- What’s wrong with this? This is taking anything not taxed, and saying “Justify why the government should not take this.” It is the same attitude that requires businesses to prove their innocence before administrative tribunals. And you get to go first, so after you’ve rebutted the state’s case, they spend a month developing a new case and set of theories, and come in and “prove” you hadn’t proven your innocence.
The overwhewlming majority of these are not tax exemptions, tax loopholes, or tax “thingies”- most of them are “property not taxed”.
An exemption is when you have a tax that applies to apples, but you exempt Granny Smiths. Pears not being taxed is not an exemption. Nor is it a loophole. Nor is it a thingie.
The list of tax exemptions is quite a bit smaller than the billions always referenced. And the list of exemptions that anyone would even touch is MUCH smaller- at most, a couple or three hundred million dollars, and most of that most folks would not touch.
Scour the long list of “exemptions” and post what YOU would tax- and before you touch services, come up with a good reason why Boeing should have tax free accountants and lawyers, because they are on payroll, and small business should have to pay tax on the very same services, because they have to go outside to get them…
Oh, also- Locke was House Appropriations chair when the taxes were raised in ’93…
Somehow I’m not surprised. Service businesses are the goose laying golden eggs in this state right now.
What is wrong with outside private companies auditing the state? Probably do a better job as well as be more cost efficient.
though the Auditor oversees them.>>>>>>>>>>>>>>>>>>>>>>>>
Hence my problem…oversees means to me they must do it to the auditors satisfaction…
Goldy, I am curious, if you made the rules and EVERYTHING was ran your way, with the government taking in as much money as it “needs” for “essential” programs, redistributes what money it sees fit to…what is the difference between your utopia and pure true communism (we can call it socialism if you like word semantics)
Pardon my ignorance, but aren’t some services already taxed? If a plumber comes to my house, or any tradesman, the service performed is taxed. My wife’s accountant does not charge a sales tax (I think this is so).What is the dividing line between services that are taxed, and services that are not? Is the line clear to most observers?
Well, lets clarify by using the retail sales tax as an example- Chapter 82.08 RCW (we’ll ignore the use tax for the moment). RCW 82.08.020(1) is the tax- “There is levied and there shall be collected a tax on each retail sale in this state equal to six and five-tenths percent of the selling price.” And you can go through Chapter 82.08 RCW and see a long list of exemptions from this tax, including food, prescription medicine, insulin, and bull semen.
Nowhere will you find services exempted. That is because “services” are not a “retail sale” as defined in RCW 82.04.050- except for some very particular services that have been included as “a sale of personal tangible property” (that being “install, repair, clean, alter, improve, construct, or decorate real or personal property of or for consumers”). Legal services, accounting services- even haircuts- are not taxable because they are not a retail sale of tangible personal property (and are not caught up in the construction or decoration categories).
Services are NOT exempted. The tax on the apple of retail sales does not apply to the pear of personal services.
Do taxpayers understand? Ask any taxpayer if they understand why apple juice is tax free, but cranberry juice is sales taxable…
I am fairly certain that the line is whether any taxable items are suplied by the tradesman. Hence a lawyer only supplies his educated time, but a mechanic supplies the same but also charges you for a water pump….
Now, Goldy, having spent several posts tearing at your position, I’ll say this- when businesses have come in and argued for a true “exemption”, or any other favorable treatment, it is perfectly valid to look and see if they have delivered what was promised for that exemption or special treatment. But you do not have a lot of those exemptions on the books.
What you have is tax-exempt insulin, tax-exempt bull semen (there is a very good reason for that one), tax-exempt food, etc. What social policy was promised? None. What business pushed these (well, yes, ag did push bull semen). Which comes to my final point-
Talk about bull semen, and your posts are held for review…
No- the molehill of exemptions with promises attached is constantly made into a fantasy mountain. It ain’t real.
When would you tax the bull semen, upon delivery from the bull or upon reciept of the heifer?
You know, Chuck, in this modern age, there are all the middle-people between the bull and the heifer… We could tax it at several stages…
Possibly you could tax the bull semen at the registration of the cows calf, that way you could tax it on the fair market value, starting at the first year as maximum value, then prorate it down through the years. You wouldnt go by actual value of the animal, it may break an ankle or something cheating the state out of some money, no instead we should sticck to our pie in the sky prorate system. See there is no reason for a one time bull semen tax.
Then you could ad such things as oxcarts for public transportation on the registration fee.
And janitirs for towns of less than 400 residents, such as Mansfield…as well as a tax for towns such as Bridgeport, so they can operate thier swimming pool!
We could even have rowboats to cross the sound if we taxed the cow registration.
We could grow on these ideas and spawn generations of people getting as well as expecting free rides from bull semen…what an idea!
Imagine the freeloading society we could develop.
Jim… we have a couple unrelated issues here. First, I don’t think I ever implied that the absence of a sales tax on services is a tax “exemption” (or whatever you insist on calling them.) But that’s not really the point. These bills are all about accountability. What you are suggesting is… hey… why bother reviewing tax “preferences”… there aren’t enough that aren’t doing their job to make a difference. So much for accountability.
But let’s get back to sales tax on services. We have a tax structure designed for an agricultural and industrial economy, and yet we now live in a service economy. We have structural inadequacies that projected out into the near future will surely leave our state and local governments in crisis, if not bankruptcy. Your party will fight tooth and nail to prevent us from implementing a modern tax structure (yes… an income tax)… but God forbid we should extend our primary tax, the sales tax, to services that are increasingly becoming the largest part of our economy.
So what the fuck are we supposed to do Jim? You talk about the public not understanding why cranberry juice is taxed but apple isn’t (it’s because cranberry “juice” is more sugar water than actual juice). But the real problem is that the public doesn’t understand that the status quo is going to give us the libertarian dystopia the BIAW and Tim Eyman and apparently even Dino Rossi really want!
So tell me… what’s your solution?
I just laid out a plan for you Goldy, tax the living fuck out of cow registrations, the godamn farmers are getting rich off of those federal government subsidies, we may as well tap that unlimited resourse.
NO MORE FREE BULL SEMEN RIDES!
Comment by Goldy— 1/19/05 @ 11:09 pm
I think it is the Democrats who really don’t want a state income tax. Gregoire carried voters making over $100,000 a year over Rossi by 53% to 45%. Kerry beat Bush among the same group by 63% to 37%. And Murray clobbered Nethercutt by a whopping 65% to 34%.
So I will happily support an income tax, so long as it is crafted in such a way that the Democrat leaning upper crust has to pay their fair share. Give a decent exemption for families and their dependents at the lower income end of the scale. Tax all remaining income without any other sorts of deductions whatsoever.
And, of course, only on the condition that the regressive sales tax is completely eliminated as part of the adoption of an income tax. And also make the B & O tax scheme more sensible.
Richard, it sounds like you would love the Sims Plan. It eliminated the state sales and B&O taxes, and replaced them with a graduated income tax with a generous personal exemption. Note, under the Sims plan there would be no business taxes whatsoever.
Comment by Goldy— 1/20/05 @ 12:13 am
Where has Ron Sims been all these years on the tax issue?
During his political career, he has favored a lot of sales tax based solutions: (a) 0.1% general sales tax to fund baseball stadium (rejected by voters), (b) 0.5% food/drink sales tax to fund baseball stadium (rammed down our throats), (c) 0.4% general sales tax to fund Sound Transit (approved by voters), (d) 0.2% general sales tax to fund bus service (approved by voters), (e) 0.1% general sales tax to fund Sound Transit from downtown to U-District (didn’t get pass King County Council).
I think Sims would have had a lot more credibility if he had spent his political career complaining about how regressive the sales tax is. Instead, he consistently supported an increase in this regressive tax, and didn’t suggest an alternative until well into his campaign for governor. And only when his ass was going to be kicked by Gregoire, and his other strategies (such as press leaks about scandals and negative campaigning) had failed to erase Gregoire’s lead.
By the way, you said that precinct breakdowns of the election in the 1970’s showed that high income precincts favored the income tax.
There should be several elections in the last 10 years or so where King County voters have voted on sales tax increases. Were these sales tax increases favored more heavily in high income precincts, or in low income precincts?
Goldy- we come back to this mountain of exemptions that doesn’t really exist- are you conceding that point now that you talk of e
“extending” the sales tax to services? And do you have an answer to the problem of taxing services that small businerss pays for, that big business would have in-house- and tax free?
And drop the canard about Republicans, or business, being the obstacle to tax reform. We had the grand opportunity in 1988, and the Democrats blew it all to hell by pushing, again, for tax increase, NOT revenue neutral reform. And the vast majority of the trure tax exemptions and loopholes were put on the books with the assistance, if not leadership, of Democratic Governors, busily buying political support. These exemptions bought exactly what they were supposed to buy- campaign contributions to Booth Gardner and Gary Locke and Christine Gregoire.
You have, in Washington State’s tax code, the ultimate in Democratic philosophy- favors for those who will give money to Democratic Governors. The groups who cannot afford to play that game- small business- don’t get the favors.
So back to an earlier point- how many millions in tax exemptions/loopholes/thingies did you find that you would support, and urge the Legislature to support, removing?
Bull semen and apple juice=food. We don’t tax food. In Texas there is no sales tax on food or any item it takes to grow food. Fertilizer is tax exempt, vegetable seeds are tax exempt. I have a tax number and I don’t pay tax on livestock feed because it will eventually be turned into food. I sell honey and I don’t pay sales tax on my sales because it is food–I’d bet that if I leased those bee hives out for the pollination of commercial crops that I wouldn’t have to pay sales tax on the revenue–because the service produces food. The non-tax of items that are used to produce food also helps keep our cost of eating (that so many of you love to put forth) lower than most of the world.
Jim King…thanks for the answer to my question about the taxing (and not taxing) certain kinds of services. I’m only sorry that the answer generated so many “used hay from male cattle” remarks about bull semen.
I think I get the picture. By specific statutory language, work done on real property, whether or not it involves the installation of an actual product, is taxed, but work done on other than real property, such as my head (and, I might add, the heads of many of the contributors here), is not taxed. I think I understand the notion behind this distinction, but it’s very flimsy.
On the latter-day effects of the repeal of the MVET and the 1% property tax limit, there is an op-ed piece in today’s PI by the mayor of Auburn. Sorry, but my machine decided some time ago that it wouldn’t allow me to put links in my prose.
Washington:
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On another subject:
Congratulations Iraq!
To Kerry, Kennedy, McDermott, NY Times, et al: please go straight to hell and enjoy your “quagmire” while there.