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Senate’s Proposed Tax Breaks Would Cost Big In The Long Run

Posted by Andy Nicholas at Mar 04, 2014 12:35 PM |
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Despite a looming deadline from the State Supreme Court to invest an additional $4.5 billion per two-year budget cycle in Washington state schools by 2018, last week the Senate put forward a supplemental budget plan that included 18 costly new or extended tax breaks.

Although these tax breaks are projected to have a relatively small, $10.3 million impact on the current 2013-15 state budget, if enacted, their costs would balloon to nearly $120 million by the 2017-19 budget cycle (see table).1.

 

2014_TaxActions

 

By contrast, similar to a plan put forward earlier this year by Governor Inslee, House leaders proposed to eliminate several wasteful tax breaks and take other actions that would generate more than $280 million by the 2017-19 budget cycle for basic education reforms (see table).

The bottom line is that the Senate’s plan to enact a raft of new tax breaks now is short-sighted, irresponsible, and will only make it more difficult for future policymakers to fully fund basic education and other important investments.

Senate Proposed Tax Actions

The tax actions proposed by the Senate with the largest negative impact in the 2017-19 budget cycle include:

  • Extending a tax break for “server farms” (-$50 million);
  • Extending and modifying tax breaks for high-tech companies (-$39 million); and
  • Enacting new tax and fee breaks for certain liquor retailers (-$11 million).

House Proposed Tax Actions

Tax actions proposed by the House with the largest positive impact during the 2017-19 budget cycle include:

  • Extending the Other Tobacco Products Tax to “e-cigarettes” ($77 million);
  • Changing a sales tax break for Oregonians to a rebate program ($70 million);
  • Eliminating a tax break for oil refineries ($55 million);
  • Eliminating a sales tax break on bottled water ($48 million); and
  • Eliminating a tax break for prescription drug wholesalers ($39 million).

Stay tuned to schmudget. We’ll have more details on tax actions proposed in 2014 over the next few days.

1.Technical note: this analysis examines only proposed tax actions, or changes in tax law that would alter the amount owed by a taxpayer(s) in future years compared to the current year. It does not include other revenue changing actions, such as diverting revenue streams, or so-called “budget driven revenue” measures.  

 

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