The Sun Hasn’t Set on Efforts to End Wasteful Tax Breaks

Washington has made some progress recently toward making sure that special-interest tax breaks face the same level of scrutiny and accountability as  education, health care and other public investments.

Based on our proposals, two measures that would have improved tax break accountability in our state advanced in the Legislature this year and it’s crucial for that momentum to continue.

House Bill 2762 would have required a review of hundreds of narrow tax breaks to see if they earn their keep. Senate Bill 6088 would have required that all newly created or re-enacted tax breaks be subject to regular evaluations by policymakers, the public, and state auditors.

Narrow tax breaks cost billions of dollars each year. It only makes sense to ensure the beneficiaries are delivering as promised – for instance, by creating more jobs and increasing investments in Washington’s economy.

Together, HB 2762 and SB 6088 would have ended the practice of automatically renewing tax breaks. Instead, existing and newly proposed tax breaks would include a “sunset” date – a date when they would automatically expire unless action is specifically taken to renew them. Transparency and accountability can be significantly improved by applying routine expiration dates to most state tax breaks.

Sunsets force policymakers to consider the costs and benefits of tax breaks when deciding whether to renew them. And, large profitable corporations would have to routinely justify and demonstrate the benefits of their tax breaks at public committee hearings. Our representatives would have to balance the tax breaks against other public priorities – such as educating our children and providing adequate care for seniors.

This approach was lauded in a recent study of state tax break evaluations by the nonpartisan Pew Center on the States. It cited Oregon’s practice of applying routine sunset dates to most state tax credits as an effective way to improve transparency and accountability over narrow tax breaks.

Yet, as shown in the graph below, only 10 percent of the tax breaks on the books in Washington have an expiration date.

The fact that even useless tax breaks can’t be eliminated without a two-thirds majority vote of the legislature aggravates the situation. While investments in health care, education, and public safety have been cut by some $10.6 billion since 2009, spending on tax breaks has grown.

This year, SB 6088 (sponsored by Senator Craig Pridemore) was approved by the State Senate and HB 2762 (sponsored by Representative Reuven Carlyle) passed out of the House Ways & Means Committee.

Going forward, policymakers should build on this momentum and enact comprehensive sunset dates for state tax breaks.

For more information, check out our policy brief “Every Dollar Counts: Why it’s Time for Tax Expenditure Reform.”