In the debate about how the legislature should balance the budget* one of the main liberal arguments is that we should close the loopholes that have accumulated in the tax system over the years. At least have a look at what ones are and aren’t working any more. It makes sense, after all that what the legislature passed 10, 20, 30 years ago or more in better economic times may not make sense today when put against the tough budget reality. But don’t worry, Representative Ed Orcutt knows better. Not how to balance the budget, silly: what to call the loopholes.
As the Legislature contemplates how to deal with a multi-billion dollar budget shortfall, one of the more common phrases heard around the Capitol is “closing tax loopholes.” While this may seem admirable on the surface, a closer look reveals a complex economic system that can’t be oversimplified by catchy special interest sound bites.
Special interest = struggling families who have lost medical and dental care, and or schools.
Special interest ≠ out of state banks that pay millions of dollars less because of these loopholes.
For most, the term “loophole” conjures up images of shady characters in smoke-filled back rooms scheming for ways to buck the system. But here in Washington state, we don’t have “tax loopholes” we have tax incentives.
If you use a different word, it makes it OK.
Why is this clarification important? Because these tax incentives have been enacted via very deliberate legislative action.
No lobbyist has ever influenced any tax cut bill, you see. And any tax break that ever once made sense will forever make sense again.
In order to be passed into law, a tax incentive must be subjected to: a public hearing; amendment; a majority vote of committee members; and then subjected again to amendment and a 50-vote requirement to pass from the House floor. It then has to go through the same rigorous process in the Senate (with a 25-person vote requirement). If it passes both the House and Senate, it still must be signed into law by the governor. Often, these proposals receive far more than the 50 and 25 votes needed. So, it is a rigorous and difficult task for a bill to be passed and enacted.
The same process will also apply to any repeal (except it may also go to the voters or have to be 2/3 of the legislature). So, problem solved.
Furthermore, this process is done publicly with bill hearings announced in advance and testimony taken in public meetings. Anyone can now access any hearing via TVW webcast. There is no hiding. And lobbyists for the groups who are now calling for the repeal of these policies had every opportunity to testify against the proposals. Did they? Weren’t the bills still passed – and these incentives enacted – because of their benefit to our economy?
Well, our economy looks very different than it did when those loopholes passed. So it makes sense that we would see if they still make sense. We also enacted the social safety net to benefit our economy, not to mention to keep the most vulnerable safe. By the logic of the previous paragraph, we can’t dismantle that, since it had hearings and passed the legislature, etc.? And our schools have been funded by previous legislatures, and there’s even a clause about a paramount duty.
The fact is these incentives have been beneficial to workers, employers and communities throughout the state. Thousands of jobs with high wages and benefits have been created and many jobs in manufacturing have been saved. They worked because a lower tax rate brought businesses to Washington that would not have come otherwise.
Instead of actual facts to back this up, could you please give me an example you pulled out of your ass?
Which would you choose, a tax rate of 0.5 percent on $10 million or a 1.5 percent rate applied to $0? I choose the 0.5 percent rate as it creates jobs and generates revenue. The higher rate does not because many of those economic activities would gravitate toward more competitive states. That means the lower rate has actually protected or enhanced the funding for many of the programs that special interest groups are now trying to protect. Repeal of these incentives would leave employers with little option but to lay off more workers. Can we really afford that? Our efforts should be to create jobs, not destroy them.
If we rescind the loophole for banks, THERE WILL BE NO BANKS TO TAX IN WASHINGTON!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!111!!!!
Over the last few years, true loopholes have been examined and eliminated. The improper use of reseller certificates to get building materials tax free for personal use, and tax avoidance have both been thoughtfully – and rightfully – repealed.
It’s only a loophole if I don’t support it.
Proposals to end our current tax incentives are by definition tax increases. Voters clearly said ‘No!’ to that last fall, and with good reason. Any tax increase would lead to job losses in our state and further delay the rehiring of workers by any employer affected by such a tax increase.
Well to the extent that you can divine anything about closing loopholes from that, they said they wanted either 2/3 of the legislature to vote on it or to put it to the people. So, if enough of your colleagues support it, then it can pass. So vote to close loopholes and problem solved.
A repeal of these incentives would further hamper our economy’s recovery and devastate our state and household budgets. We need to get past the misleading rhetoric of impropriety and look for better ways to get our budget balanced and to get Washington working again.
By cutting Basic Health and education. QED!
* No mention of if we should balance the budget, because you know in times of crisis, why would we want all options on the table?
Oh…the Republican? From Kalama? THAT Ed Orcutt? My my my.
@1,
Yes. Link added, too.
‘Cause all those “tax incentives” have turned Kalama into an upright and thriving metropolis…
Some loopholes make sense for a limited time, but most of them have always been handouts to buddies. Time to get rid of them.
http://apps.leg.wa.gov/districtfinder/
Find your legislator and tell them what you think.
It has a certain Alice In Wonderland tone to it, doesn’t it?
One loophole they should get rid of is the “tax incentive” for newspapers. I haven’t seen the ST add any jobs lately, have you?
In the other Washington, GOP and Democratic negotiators averted a government shutdown literally at the 11th hour — one hour before federal agencies were instructed to shut down.
In a departure from Democratic Party SOP, the terms of the agreement don’t appear to be a total cave-in: Republicans got $7 billion more of short-term spending cuts than Democrats previously agreed to ($38 billion versus $31 billion) but they didn’t get the restrictions on EPA, elimination of Planned Parenthood funding, or cuts in health care for low-income women* they held out for. But Democrats had to throw the (mostly black) female population of the District of Columbia under the GOP anti-abortion bus.
* Why the hell do Republicans hate poor women so much?
Longer term, Republicans are still targeting health care: They want to shutter Medicare (whose administrative costs are 1/2%) and give seniors vouchers to purchase private health insurance (whose administrative costs are 30%) — as if health care isn’t already expensive enough in this country.
Here’s the GOP “Roadmap For America”:
1. Increase unemployment;
2. Reduce wages;
3. Take away health care.
Why do Republicans hate Americans?
@ RR
Because Republicans are assholes.
Republicans don’t believe in halfway measures. They ALWAYS go for the whole burger. Here’s how their scheme to get rid of Medicare works. First you eliminate Medicare for people under 55. This makes all those people resentful of the people over 55 who still have Medicare. Then, with their support in your pocket, you eliminate Medicare for people over 55 — even though you promised them you wouldn’t. (When did a Republican ever tell the truth or keep a promise?)
This is exactly what they did with unions. First, they eliminated private-sector unions. Then they eliminated private-sector benefits and lowered private-sector wages. This made private-sector workers resentful of public-sector workers who still had their unions, benefits, and wages. Exploiting that resentment, Republicans have set about to eliminate public-sector unions and benefits, and lower public-sector wages.
They’ve as good as pulled this off with the hapless public workers, who obviously didn’t see it coming. (Some of them may even have voted for those Republican bastards, if recent polls are to be believed.) If they can pull this off with Medicare, the next obvious target will be Social Security.
After Republicans have taken away jobs, benefits, pensions, unemployment insurance, Medicare, and Social Security, they’ll be the only ones to have any money. The rest of us will be Solyent Green. I don’t believe for one second they’re incapable of euthanazing the “surplus” population — after we’re not useful for lining their pockets anymore, why would they keep us around?
Roger Rabbit’s Stock Market Analysis
Except for oil stocks, which are still going up because crude continues to go up, stocks are sliding sideways. One day they’re down, the next day they’re up, but your portfolio probably hasn’t changed much from where it was a month ago.
I saw what I think is a pretty good explanation today: Although big-cap P/Es are still below historical norms, investors believe current profits are unsustainable and have priced these stocks against their expectation of lower future earnings.
It makes sense to me. A number of things are likely to chip away at today’s sky-high profits in the days ahead: Rising commodity prices will cut into margins, and companies will have difficulty passing these cost increases to consumers in today’s weak consumption environment; as the economic recovery continues, demand will increase, forcing companies to expand payrolls, and reduced unemployment coupled with price inflation will put upward pressure on wages; when the Federal Reserve ends quantitative easing in June there will be less new money flowing into the economy, and therefore less will end up in corporate coffers.
In other words, the post-depression runup in stocks is all but over, and the only thing investors can expect from stock prices over the next few years is the tortoise-like growth shackled to the growth rate of the economy — some 2% or 3% a year.
There are ways around that, of course — the normal way of making money in the stock market is ALWAYS to look for undervalued situations and shift capital into those stocks (by selling holdings that have reach fully-valued status) before the broader market gloms onto them. This always requires getting ahead of the market, but not too far ahead, because you don’t want to wait years for the market to move those stocks higher.
Right now, I don’t see any obvious short-term undervaluation plays. Longer term, the market probably has put too much emphasis on shrinkage of defense spending and some large stocks in the defense sector, including Lockheed Martin and General Dynamics, appear undervalued long-term; but it may take quite a while for the market to regain confidence in their long-term earnings prospects.
What I do see right now is some distressed stocks and moribund stocks that, on paper, are undervalued — but not in real life. Hewlett-Packard, which recently replaced its management, looks cheap until you take into account how fucked up that company is. More or less the same goes for Johnson & Johnson and Pfizer — both of these companies have low P/Es but deserve them, and may not improve their performance in a value-adding sense for quite some time. Intel and Microsoft look inexpensive on paper, but neither of these stocks have gone anywhere for a long time, and it’s hard to see where growth would come from in their farflung but mature markets, and both have unimaginative managements stuck in ruts who aren’t going anywhere anytime soon.
In short, the easy money has been made (back) and the next year or so will force us to eke out pedestrian gains from a more or less static business climate, unless there’s a nuclear war or something. I just don’t see how someone investing in Apple or Starbucks or Microsoft today can multiply his money by 10 or 30 times. You’ll be a hero if you can get a low-double-digit return over the next 12 months. The stocks I added to my portfolio most recently are Ford and Abbot Labs; there, I’m looking for 20% to 25% over 8 to 12 months.
Yawn. Tomorrow is another news day, maybe something interesting will happen, or maybe another REPUBLICAN CROOK will get caught. (Republicans are clever about some things, but covering their tracks isn’t one of them.)
If, as Rep. Orcutt says, “these tax incentives have been enacted via very deliberate legislative action,” then what’s wrong with using an equally deliberative legislative action to revoke them?
Spending is spending, and the Legislature should adopt a single standard for spending cuts and spending increases regardless of who they benefit.
Steve Breaux
Washington Public Interest Research Group
“tax loopholes” is lazy framing by the dems. it sounds as it it were an afterthought or a mistake that sadly let’s someone escape taxes.
better is “welfare programs for lazy corporations that free load and want you to pay their share.” they have to stop sticking their hands in our pockets, etc., the sick corrupt cheats. and their sick corrupt politician friends. those elitist gop politicians in their pockets. the system is corrupt.
that kind of talk has two advantages. one it’s objectively true. two it’s more emotionally laden thus stimulating the listener to action far more than the wonky wonk wonky highbrow long discursive talk the democrats like so much in which they barely manage to state their actual conclusion because deep inside they do NOT favor bipartisan compromise and they do NOT favor closing “loopholes” on the inside they DO think the rich are ripping us off, but they’re just too askeered to SAY SO the way that Sean Penn laid it all out for the “hicks” in that speech in All the King’s Men.
Somehow, the dems simply have trouble pointing their finger at the gop and calling them corrupt.
They are like domestic abuse victims, trained to see their enemy in the best possible light while minimizing the wrongs that are done to us all.