New Bills Would Eliminate Tax Breaks to Fund Essential Services

The viability of curtailing special tax breaks – to preserve our investments in safe, healthy, and well-educated communities -- has recently been called into question by those who favor a damaging, all-cuts approach to our economic problems. Newly-introduced pieces of legislation show that this approach is not only possible, but that it is critical to our future prosperity.

Two bills introduced since last Friday -- Senate Bill 5926 and House Bill 2078 -- would eliminate a sales tax exemption for out-of-state shoppers. This exemption costs Washingtonians over $30 million in foregone resources each year.

Senate Bill 5926 would redirect these revenues to fund in-home care services for seniors and people with developmental disabilities. In-home care services provide assistance with dressing, bathing, eating, and household tasks, allowing people who are ill, disabled or vulnerable to stay in their homes. In the budget passed by the House, in-home care hours are reduced by an average of 10 percent.

In addition to eliminating the exemption for out-of-state shoppers, House Bill 2078 would also curtail a costly business and occupation (B&O) tax deduction that predominantly benefits large national banks. (The measure would hold small community banks harmless by capping deductible home mortgage interest income at $100 million.) The revenues freed-up by cutting these tax breaks would be used to restore funding for smaller class-sizes (K-3 class-size reduction).

Washingtonians have always had a choice when it comes to how we respond to the Great Recession’s lingering effects on our state budget. We can adopt a balanced and responsible approach that preserves vital public services through tax increases, the elimination of wasteful tax breaks, or both.

Given the magnitude of cuts under consideration, two-thirds of legislators ought to agree on a modest package of revenue enhancements to mitigate the worst of the cuts. Absent that, a simple majority of lawmakers should send such a package to the voters for approval in November.

For more information on how we can reform our opaque patchwork of special tax breaks, check out our new Framework for Prosperity website. This tool provides a common sense, vision-based approach that includes measuring our progress toward key public priorities and securing our fiscal future through long-term reforms.