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Those who believe that the $57 million in new tax resources included in the Washington State Senate’s latest budget proposal represents a significant compromise in the ongoing budget negotiations are in for a big disappointment.
The new resources are no compromise from the Senate leaders’ rigid position of being against any new taxes to support schools and other priorities. Rather, they are a one-time payoff from large TV, cable, and media companies in exchange for a permanent tax cut that in the years ahead will cost the state millions of dollars that could have been used to help build a stronger economy.
Worse, this sweetheart tax deal sets a troubling precedent: It rewards businesses that don’t fulfill their civic duties and that evade paying the taxes that are needed to support safe communities, public infrastructure, and other investments that benefit all Washingtonians.
For at least the past six years, many large national media companies that supply TV shows, movies, and other content to local broadcast stations have been dodging Business & Occupation (B&O) taxes on their advertising and royalty-income-generating activities in Washington state.
Before 2010, these and certain other businesses were able to avoid paying taxes on their activities in Washington state if they had no employees, agents soliciting sales, or property located here. In 2010, lawmakers wisely plugged that tax loophole, requiring these businesses to pay taxes on the portion of their incomes generated in our state.
But many large TV and cable companies failed to comply, avoiding about $11 million per year in B&O taxes tied to their Washington-based advertising activities, according to estimates from the state Department of Revenue. And now there is a threat of legal action from national media conglomerates doing business in Washington state that would seek to prevent the Department from collecting their unpaid taxes and enforcing the law in the future.
Senate Bill 6665 – heard in the Senate Ways & Means Committee on March 11 along with the Senate’s latest budget proposal – would reward these businesses for shirking their responsibilities to Washington state. Companies in the mix would likely include multibillion-dollar corporations like Comcast-NBCUniversal and Fox Broadcasting Company.
Under the proposal, all fines and penalties assessed on unpaid taxes from June 2010 to July 2016 would be waived for any business that pays by October 2016. And the actual amount the companies owe in unpaid taxes from that time period would be cut in half.(1) Their tax responsibility moving forward would also be cut in half.
The upshot is that under SB 6665 there would be a one-time, $57 million boost in B&O tax revenues in our state from national media corporations as they rush to take advantage of a massive giveaway of public money that they’d be crazy to turn down. The deal allows them to pay a mere fraction of their total unpaid tax bills now and receive a large permanent reduction later.
Far from being a needed breakthrough that would enable policymakers to make real progress on addressing the many challenges communities face across our state, the latest Senate budget is really just more of the same: unsustainable gimmicks and wasteful tax breaks for large, profitable corporations that don’t need them.
(1) Under current law, these companies are required to pay B&O taxes on about 2.2 percent of their total nationwide advertising income, which amounts to an estimated $730 million per year, according to the Department of Revenue. But SB 6665 would permanently cap their Washington portion at 1.1 percent, or $360 million per year. Their cumulative tax bills on advertising revenue would be reduced from about $11 million per year to $5.6 million.
*The original version of this post incorrectly stated that any taxes national media companies owed to Washington state from before January 2012 would be entirely forgiven under SB 6665.