What to do about Washington's tax loopholes
State Rep. Reuven Carlyle, D-Seattle, offers reasonable legislation, HB 2762, with broad implications for future budgets that says tax exemptions lacking an expiration date should acquire one. The tax loophole sunset bill is wise long-term reform.
Seattle Times Editorial
ALMOST every year, lawmakers in Olympia engage in a predictable ritual: They lament many tax loopholes that may no longer make sense but end up doing little about them.
State Rep. Reuven Carlyle, D-Seattle, offers reasonable legislation. HB 2762, with broad implications for future budgets, says tax exemptions lacking an expiration date should have one.
Roughly 250 loopholes fall into that category. Obviously, most exist for a good reason and should be retained.
But tax breaks, once enacted, should not run indefinitely. Through rigorous review, the state can determine whether taxpayers benefit from a tax break — or not.
In some cases, placing a sunset clause on a loophole would trigger its expiration. In others, it would mean the loophole continues if it is justified. The first group of exemptions facing review would be in 2017. Others would be considered on a rolling basis thereafter.
"We scrub the numbers and see if it works for taxpayers," said Carlyle. "Or is it simply a giveaway not adding any value to the public?"
Carlyle's legislation exempts tax breaks with obvious public benefit or based on legal necessity — those on food, medications, employee wages, those constitutionally required or those that are part of an existing legal agreement.
But if the sunset legislation passes — it should — the default position of the state switches from the idea that exemptions continue in perpetuity to the idea that exemptions must re-prove their value or expire.
Carlyle's legislation requires a two-thirds vote, meaning Republicans and Democrats have to participate. The bill's co-sponsor is Rep. Glenn Anderson, R-Fall City, so the bill has some Republican support. Anderson has requisite skills to bring others along. A bipartisan effort is required to bring sanity to the state's helter-skelter system of providing tax breaks and then forgetting about them.
This is smart long-term government reform because it forces beneficiaries of tax breaks to remake the case at a date that's certain. If a tax break delivers good value, it should continue. If not, the state can no longer afford a blind giveaway.
Tomorrow: more about an innovative treatment for the tax break given to larger companies engaged in high-tech research and development.