By Andrew Nicholas -- The worst thing that Washington state policymakers could do for our state economy would be to use scarce tax dollars, needed to support schools, health care, public safety, and other investments, on subsidies for companies that ship jobs out of state.
Fortunately, leaders in the House are proposing to apply strict accountability measures to the new aerospace tax breaks proposed earlier this week by Governor Inslee. While these measures will do much to help ensure the benefits of these tax breaks remain here in Washington state, more could be done to protect Washingtonians should Boeing fail to keep its end of the deal.
In order to convince Boeing to manufacture the 777X, a new variant of the 777 airliner, in Washington state, legislators gathered in Olympia this morning to begin debating a package of new state spending items, tax breaks, and regulatory reforms.
Introduced this morning at the request of the Governor, House Bill 2089 would:
• Extend a preferential B&O tax rate for commercial airline manufacturers: In 2003, lawmakers enacted a 0.2904% business and occupation (B&O) tax rate for the activity of manufacturing commercial airplanes. This rate is far lower than the typical manufacturing rate of 0.484 percent and, as a result, reduced state tax resources by about $160 million in the previous 2011-13 budget cycle. This preferential rate is currently scheduled to expire in 2024. HB2089 would extend that deadline to 2040.
• Expand sales tax exemptions on materials and services related to aircraft construction: Also in 2003, policymakers enacted sales tax exemptions on computer software and hardware used in aircraft production in addition to construction materials and labor services used in the construction of “super efficient” aircraft (787) assembly buildings. Those exemptions are also scheduled to expire in 2024. HB2089 would extend them to 2040. It would also expand the exemption on construction materials and labor to include those used on building of all kinds of commercial aircraft, not just super efficient ones. We will report the cost estimates when the fiscal note is published.
• Extend several other business tax preferences: HB 2089 would also extend the expiration date to 2040 on several other aerospace related tax breaks—including a preferential B&O of 0.2904 percent for aircraft repair stations; a B&O credit for certain expenses related to aircraft construction; and a B&O credit for property taxes paid on facilities used to manufacture commercial aircraft. We will report the cost estimates when they become available.
Few accountability measures were applied to these tax breaks when they were adopted in 2003. Consequently, Washingtonians had little recourse when Boeing, having requested these tax breaks in the first place, subsequently decided to locate a significant portion of 787 production in South Carolina. House leaders are working to ensure that doesn’t happen again.
House Bill 2089 includes the following accountability measures:
• An automatic “off switch” if Boeing fails to build the 777X in Washington state: As written, the preferential B&O rate for manufacturing aircraft would automatically terminate if Boeing does not locate 777X production facilities here in Washington state by 2017.
• Frequent performance evaluations by state auditors: Under HB2089, beginning in 2019, state auditors from the Joint Legislative Audit and Review Committee (JLARC) would be required to conduct performance evaluations of these tax breaks every five years. Under these evaluations, auditors would look closely at aerospace employment data and other metrics to ensure these tax breaks are creating the promised jobs here in Washington state.
• Clear goals, performance metrics, and policy objectives: Unlike many previous tax breaks, this measure clearly states that the goal of these tax breaks is create and maintain aerospace jobs in Washington state. That’s important because, without clear objectives established by the legislature, auditors can have a difficult time determining whether or not a tax break is successful. The bill also instructs JLARC to review unemployment insurance and other relevant data source to conduct its evaluation.
This is a good start towards ensuring accountability, but more needs to be done.
Stay tuned to schmudget tomorrow as we discuss additional components that need to be in place to ensure these tax breaks benefit all Washingtonians.
This morning our Executive Director Remy Trupin issued a statement on the special session. Read it here.
Our Executive Director Remy Trupin issued a statement on the special legislative session that starts today.
“Boeing is an important part of the Washington state economy and has historically provided good paying jobs.
Washington state has invested in Boeing as well--through transportation infrastructure, a highly educated workforce, and a variety of tax breaks and other incentives. It does not do our state’s economy any good to subsidize Boeing as they ship jobs out of state. We must ensure that significant state investments in Boeing benefit all Washingtonians.
The 2003 tax break package for Boeing cost the state billions and it didn’t stop the company from moving production of the 787 to South Carolina. We can’t let that happen again.
Any tax breaks for Boeing (or any other business) should have clear and consistent accountability measures so lawmakers and the public can hold them accountable if they choose not to uphold their end of the deal.
Lawmakers must recognize that choosing to give these tax breaks will reduce valuable revenue needed for other investments. At the top of that list is the requirement to fully fund basic education, an investment that benefits the whole state economy including Boeing."
The Annie E. Casey Foundation’s latest KIDS COUNT® policy report, The First Eight Years: Giving Kids a Foundation for Lifetime Success, presents a strong case for investing in the early years of a child's life. Decades of brain and child development research show that kids who enter kindergarten with below-average language and cognitive skills can catch up — but only if they are physically healthy and have strong social and emotional skills.
The report details how a child’s early development across critical areas of well-being is essential to make the effective transition into elementary school and for long-term school success. According to a newly released analysis, only 36 percent of children were on track in cognitive knowledge and skills, 56 percent in their physical well-being, 70 percent in their social and emotional growth and 74 percent in their level of school engagement. Clearly this trend is not moving in the right direction.
The story is more troubling for kids of color and those from low income backgrounds. The analysis shows that just 19 percent of third-graders in families with income below 200 percent of the poverty level and 50 percent of those in families with incomes above that level had developed age-appropriate cognitive skills. Just 14 percent of Black children and 19 percent of Latino children are on track in cognitive development.
It doesn’t have to be this way. Increasing our investment in early learning is one of the best ways to set all of our children up for lifelong success. Currently, in Washington state just three of every ten 3- and 4-year olds is enrolled in preschool programs, one of the worst enrollment rates in the country (see map).
We can connect more kids to preschool and other early learning opportunities by:
- Expanding both access to and quality of early learning programs;
- Identifying new revenue to fund a continuum of early learning services and programs for children birth to age five;
- Fostering strong partnerships between licensed child care centers, family child care homes and pre-K centers to create more comprehensive, high-quality, culturally competent program options for families; and
- Integrating early learning funding streams through Early Start, a single point-of-entry to our state’s high-quality continuum of early learning services for children from birth to age five.
Join us a week from tonight, Monday, Nov. 11th from 6 to 7 p.m. at Town Hall Seattle for a conversation with Greg LeRoy of Good Jobs First and Representative Reuven Carlyle about corporate subsides, transparency, and tax loopholes.
Greg LeRoy, Executive Director of the Washington D.C.-based Good Jobs First, will discuss the organization’s efforts to raise awareness about corporate subsidies and how they track and monitor which companies go most often to the public for assistance. Also on the panel is Rep. Reuven Carlyle, D-Seattle, a leading voice in the Washington State Legislature for closing tax breaks and increasing transparency. The event will be moderated by our very own Communications Director, Tara Lee.
Reclaiming Prosperity is a Town Hall produced speaker series focused on transforming our economy and building a prosperous future for working people and their families.
To learn more about the series visit http://reclaimingprosperity.org/
Press Advisory: Cuts to Food Assistance Will Impact Children, People with Disabilities, and Veterans
We have issued a joint press release with the Children's Alliance.
On November 1st, more than 1.1 million people in low-income families in Washington state will see their food assistance benefits cut, when a temporary boost to the Supplemental Nutrition Assistance Program (SNAP, formerly known as food stamps) expires.
More than 47 million Americans, including 22 million children, who receive SNAP, known as Basic Food in Washington state, will see their food assistance reduced when a modest boost in benefits to SNAP recipients, included in the 2009 American Recovery and Reinvestment Act (ARRA) to strengthen the economy and ease hardship, ends. For a family of three in Washington state that cut will amount to $29 a month. This is a serious loss for families whose benefits, after this cut, will average less than $1.40 per person per meal.
The majority of households in Washington state receiving Basic Food contain either a child, an elder or persons with disabilities. In Washington state, the cut will impact 256,000 households with children, and 234,000 seniors and people with disabilities. Veterans will also be affected by the cut. The Center on Budget & Policy Priorities analyzed Census data and determined that 51,600 Washington state veterans depend on the Basic Food Program.
“This small increase in Basic Food benefits has provided an important stepping stone for Washingtonians during the deep economic recession and long recovery, empowering them to keep food on the table as they seek employment and send their children off to school,” stated Tara Lee, Communications Director of the Washington State Budget & Policy Center.
Tracy Flowers sees the impact of hunger every day in her Spokane child care center, A Bright Beginning. Tracy and her staff have about 85 children ages 4 weeks to 12 years. She says signs of hunger are most predominant among the 2- to 5-year-olds.
Children who are hungry “are unable to focus and less likely to self-regulate their behavior,” says Flowers. The children in her care “are confident knowing they won’t go hungry here,” but nutritious food is harder to obtain for parents in an economic crisis. “People who make cuts to food stamps don’t realize the extent of the damage they’re doing to children,” she says.
At 6.1 percent, the number of hungry families in Washington is significantly higher than the national rate. Our state ranks 15th out of all 50 states for hunger. The overall hunger rate is remains virtually unchanged since its peak of 6.2 percent in 2009-2011. The Children’s Alliance estimates that 400,000 children in Washington state are at risk of hunger.
In addition to rejecting deeper cuts to Basic Food at the federal level, anti-hunger advocates want Washington state lawmakers to fully restore State Food Assistance (SFA) in the 2014 supplemental budget.
SFA helps thousands of immigrant families put food on the table, yet lawmakers cut it by half in the 2012 legislative session. It is currently set at 25 percent less than the monthly SNAP benefit level.
“No child should go hungry here in Washington state,” says Jon Gould, deputy director of the Children’s Alliance, who also serves on the B & PC Board of Directors. “With Congress stuck in neutral, we call upon state lawmakers to restore the State Food Assistance Program.”
By Andrew Nicholas -- The November ballot in Washington state includes five deceptive “advisory vote of the people” measures in which voters are asked to weigh-in on several modest tax changes adopted by the legislature earlier this year. Yet, the law establishing these advisory votes was purposefully tailored to deny voters key facts and context about the tax changes at issue.
Confused? Enter your friendly neighborhood schmudget. We are here to help.
As we wrote last week, public advisory votes are the brainchild of conservative activist Tim Eyman, who deliberately structured the votes to mislead voters and dissuade lawmakers from taking any action to raise additional funds for health care, education, public safety, and other investments that create jobs and build a strong state economy.
Below is detailed information about each of the five public advisory votes on the ballot—information that you won’t find in the ballot titles or the voters’ guide.
Advisory Vote No. 3
“The legislature eliminated, without a vote of the people, a leasehold excise tax credit for taxpayers who lease publicly-owned property, costing approximately $2,000,000 in the first ten years, for government spending."
Context: Senate Bill 5444 was introduced during the 2013 legislative session in order to reduce costs and improve efficiency at county property tax assessors’ offices throughout Washington state. Before this bill was enacted, county property tax assessors were required to perform costly and time consuming assessments of publically owned properties, an activity that served little purpose since property owned by the state or local governments are exempt from the property tax. However, in eliminating these costly assessments policymakers also had to eliminate a small leasehold excise tax credit, which was calculated using property tax assessments, available to certain businesses that lease publicly-owned land.
Revenue impact: The elimination of this tax break was projected to increase leasehold excise tax collections by $145,000 per year at the state level and by $127,000 per year at the local level.
Advisory Vote No. 4
“The legislature imposed, without a vote of the people, an aircraft excise tax on commuter air carriers in lieu of property tax, costing approximately $500,000 in its first ten years, for government spending."
Context: Senate Bill 5627 was championed by Governor Inslee in order to reduce taxes for Kenmore Air, a commuter air carrier located in Washington state. Prior to the adoption of this legislation, commuter aircraft were subject to the state property tax. Under SB 5627 commuter aircraft were exempted from the state property tax and instead became subject to the aircraft excise tax.
Revenue impact: Although Kenmore Air will pay an additional $35,000 per year in aircraft excise taxes, its state and local property tax bills will fall by about $51,000 per year, a cost that will automatically be recouped through higher property tax bills for other homeowners and businesses.
Advisory Vote No. 5
“The legislature extended, without a vote of the people, the insurance premium tax to some insurance for pediatric oral services, costing an amount that cannot currently be estimated, for government spending."
Context: House Bill 1846 was enacted by policymakers to ensure that consumers purchasing health insurance plans through Washington state’s new insurance exchange, a major component of the Affordable Care Act (Obamacare), would be able to purchase stand-alone dental coverage for their children, if such coverage wasn’t included in their health plan. HB 1846 also created a more even playing field by eliminating an insurance premiums tax exemption. Without this change, pediatric dental services offered in the exchange would not have been subject to the tax while those operating outside of the exchange would have been required to pay it.
There was no opposition to this bill when it received a public hearing before the Senate Ways & Means Committee on April 8, 2013. Representatives of health and dental insurers and the Washington Dental Service all testified in favor of this bill.
Revenue impact: Indeterminate.
Advisory Vote No. 6
“The legislature eliminated, without a vote of the people, a retail sales tax exemption for certain telephone and telecommunications services, costing approximately $397,000,000 in the first ten years, for government spending."
Context: Policymakers enacted House Bill 1971 in order to foster more stable funding for emergency 911 services (E-911) and investments that ensure lower-income and rural residents have access to affordable telephone and voicemail services. In doing so, this bill also brought greater equity and parity to taxes applied to landline, cellular, and internet, telephone services. This was accomplished by extending the sales tax to previously exempt landline telephone services. (Cell phone services were already subject to the sales tax.) It also eliminated two excise taxes that applied only to landline telephone services.
By adopting these changes and clarifying the law, policymakers also negated an ongoing and potentially costly lawsuit that was brought by mobile telecommunications companies in 2007 over sales taxes applied to cell phone services.
Revenue impact: Extending the sales tax to landline telephone services along with the elimination of two landline-only excise taxes will increase state tax revenues by about $30 million per year.
Advisory Vote No. 7
"The legislature extended, without a vote of the people, estate tax on certain property transfers and increased rates for estates over $4,000,000, costing approximately $478,000,000 in the first ten years, for government spending."
Context: House Bill 2075 closed a legal loophole that would have allowed certain, very wealthy estates to avoid paying any estate taxes used to fund public schools. Without this fix, the state would have lost roughly $120 million in resources used to educate our children.
The estate tax was overwhelmingly approved by voters in 2006. However, as part of the “Bracken decision,” the State Supreme Court effectively eliminated the tax for certain married couples due to a legal technicality.
HB2075 closed this loophole. It also changed the law so that the tax threshold, which exempts any estate valued less $2 million from paying any estate taxes, will rise annually according to the rate of inflation. The bill also provided a $2.5 million deduction for small businesses and increased the rates for the wealthiest households by 1 percentage point to offset the costs of the new deduction and the increased exemption threshold.
Revenue Impact: In the fiscal year that ends in July 2014, this measure will prevent a $118 million loss in estate tax revenues for public schools. Going forward, HB 2075 will increase revenues by about $40 million per year.
Be sure to check out our post from last week which details how the advisory votes distort the facts.
Budget Matters 2013, our second annual policy conference will be held on December 12th. The early-bird registration deadline is rapidly approaching, in less than one week, on Thursday, October 31st. (You can still register after that date, but it will cost you more)!
We have great panelists including: Jared Bernstein, Senior Fellow at the Center on Budget and Policy Priorities; Governor Jay Inslee, State of Washington; and Heather McGhee, Vice President of Policy and Outreach at Demos.
We have finalized our topics for the day, they include:
for a Middle-Out Economy -- Hard work is strongly valued within our society, and workers in the U.S. and Washington state remain the most productive in the world. Yet, hard work no longer ensures the ability to meet basic needs or being firmly rooted in the middle class. Today, not only are there not enough jobs to go around, but jobs do not pay enough for families to meet basic needs and get ahead. It doesn’t have to be this way . Come learn about investments we can make to improve wages and employment for workers and a strong economy.
a Revenue System that Works for All Washingtonians --Washington state has the most backward revenue system in the country. We rely too much on working and middle class families to fund our shared investments in education, health and public safety, and don’t ask enough from those most able to pay. The system makes rising income inequality worse and in recent years has led to deep budget cuts that have disproportionately impacted low income families and communities of color. We will examine how reforms to our revenue system can help address income inequality and build a more prosperous state for all Washingtonians.
Perspectives: The 2014 Legislative Session and Beyond -- Reporters, columnists, and editorial board writers bring a unique perspective on issues that impact our state. We will ask them to share their thoughts and insight on a variety of issues. As the legislature struggles to fully fund basic education, how will they prioritize other issues? How can we make sure that all children have what they need to be successful? How can we grow our economy and create living wage jobs? What is the state’s role in addressing income and wealth inequality?
- Creating a Sustainable Environment for All -- A good quality of life depends on clean air and water, a safe environment, and sustainable infrastructure. But these assets are not shared equally among all communities in Washington state. This panel We will explore how investments in the environment and smart policies can ensure all Washingtonians benefit from a clean environment and smart economic development regardless of income, race, ethnicity or geography.
- A Safe Bet: Upping the Ante in Early Learning-- High quality early learning is one of the best investments we can make to optimize children’s abilities and success, close the opportunity gap, support working parents, and develop our future workforce. Yet, just one percent of the entire education budget in Washington state goes toward early learning. Learn about the progress being made in the early learning movement in Washington state and issues to be aware of this coming legislative session.
- Messaging Against Anti-Tax and Anti-Government Rhetoric -- Tired of losing debates about government and taxes? Want to fight back? Come learn how to strategically and effectively message around the unique role of government in our society and the importance of equitable revenue to pay for public investments. Hear from communications professionals who incorporate the latest messaging research into their work.