REPEAL of tax breaks for business is on the minds of Democrats in Olympia. They are looking for revenue. The wider question is of economic results.
The Democratic-controlled House has voted to raise several hundred million dollars of revenue by closing a handful of preferential rates.
Rep. Reuven Carlyle, chairman of the Finance Committee, goes further. Under Engrossed Senate Bill 5843,
the Seattle Democrat would require that preferential rates have an economic purpose and a method of measuring to see if the purpose has been achieved — a reasonable standard. Preferential rates would expire in 10 years unless otherwise stated. Each company receiving preferences would have to disclose the total dollar benefit.
The bill applies only to future tax preferences, though Carlyle and others would like legislators to review all the preferences on the books.
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The side in favor of spending will immediately say this is a good idea. In some cases it would be. Some low rates of business-and-occupation tax have been around for so long that the reason for them has expired.
But a uniform rate across industries is not necessarily rational. The ability to pay is not uniform, nor the practical ability to move out of state. The code has separate rates for retailing, manufacturing and services, and there are exceptions to these. The rate for manufacturing doesn’t apply to aerospace. The rate for services doesn’t apply to insurance agents. And so on.
Washington’s rates of B&O tax are “rational” only in the sense that they have evolved and companies have learned to live with them. Like moss, morning glory and the garden slug, the setup has survived.
Could it be made more rational? Yes. Would it be more rational if the Legislature did things over? Maybe.
The safer path for old tax preferences is to let the review remain in the hands of the Joint Legislative Audit & Review Committee.
The procedure outlined in ESB 5843 is for new preferences, and for those it makes sense.