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Tax Break Transparency Bill Is a Small Step in the Right Direction

Posted by Andy Nicholas at Jan 23, 2014 01:15 PM |
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Legislation that would make a small step toward a more transparent and accountable system of tax breaks in Washington state will receive a public hearing later today in the House Finance Committee. If approved,  HB 2201 would lead to improved performance audits of state tax breaks.

It would also allow policymakers and the public to access important contextual information—needed to foster informed debates and policy decisions—on which businesses use tax breaks, and whether they are creating good jobs in Washington state. While this legislation would be a good step forward, much more needs to be done to ensure the more than 650 tax breaks on the books are serving the needs of all Washingtonians.

Reasonable Reforms

The reforms proposed under HB 2201 would bring greater transparency and accountability to state tax breaks by:

  • Improving the quality of tax break performance evaluations: Under current law, state tax break performance audits are hampered by a lack of reliable data on which businesses use the various state breaks, the amounts they claim each year, and how the tax break dollars are used. HB 2201 would improve the quality of tax break data by requiring businesses to more accurately report their use of individual tax breaks on their state business tax returns.
  • Improving and streamlining reporting requirements for certain tax breaks: To claim 32 tax breaks, businesses are required to file a report or survey detailing their use of tax break dollars. However, much of the information mandated in these surveys and reports is of limited use to state auditors and policymakers. And much of it cannot be accessed by the public. HB 2201 would consolidate these surveys and reports into a single report that captures more useful information, such as the amount of a tax break claimed, the types of jobs created by the tax break, and average salaries and benefits associated with those jobs. Furthermore, all of the information in the new reports would be available to the public on-line.
  • Ensuring large corporations remain accountable to the public: HB 2201 would require all large corporations that claim more than $10,000 in any state tax break each year to disclose essential tax information to the public, including their annual gross business income, the amount of state tax breaks claimed, and their bottom line tax payments. The information on corporate tax break recipients in Washington state would be made available to the public on-line, helping to foster more informed policy debates in the coming years.

Far More Must Done

The bottom line is that the proposed reforms would represent modest, reasonable steps toward greater accountability over tax breaks in Washington state. Enacting HB 2201 into law should be a key priority for lawmakers this year, but they must be prepared to make more significant steps in the years ahead.

Stay tuned for a series of future posts that will examine the components of HB 2201in greater detail.

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