This morning, members of the Washington State House Finance Committee heard public testimony on a measure that would give the public access to much-needed information about state tax breaks and the businesses and corporations that benefit from them. If approved, House Bill 2134 would allow policymakers and the public to have more-informed discussions about our state budget and how we can best use our scarce state tax revenues.

HB 2134 is similar to a tax break transparency measure (HB 2201) that passed out of the House in the 2014 legislative session, but failed to receive a hearing in the Senate. The similarities between last year’s bill and HB 2134 are as follows:

• HB 2134 would give the public access to information on businesses that receive tax breaks: The Department of Revenue (DOR) would be required to publicly disclose the name of any business that receives more than $10,000 per year in a tax break –  as well as disclosing the total amount the business claims in preferential business and occupation (B&O) tax rates, B&O tax credits, and most major B&O tax deductions. This information would be made available to the public via a searchable online database on DOR’s website.
• It would improve the quality of tax break information available to policymakers and state auditors: The current business tax return allows businesses to obscure details about their use of tax breaks by lumping multiple tax breaks into a small number of broad categories instead of reporting detailed information on each tax break. HB 2134 would prevent this by requiring businesses to itemize their use of each preferential B&O tax rate, B&O deduction, B&O credit, and sales tax exemption. Doing so would give policymakers and state auditors more detailed information needed to conduct thorough performance evaluations of state tax breaks. More background details are available in this schmudget post.
• It would improve and streamline reporting requirements for certain tax breaks: Under current law, there are public disclosure and reporting requirements attached to only a limited number of state tax breaks. To claim these breaks, businesses are required to file a report or survey with DOR detailing their use of these 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 2134 would consolidate these surveys and reports into a single report that captures  more useful information –  including 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. Further, all of the information in the new reports would be available to the public online.

In addition, HB 2134 would reform DOR’s Tax Exemption Study. Under current law, DOR releases a report summarizing most state tax breaks every four years. HB 2134 would now require the report to be released every two years, making the available information more up-to-date and relevant to current budget discussions. It would also require the department to include information on audit recommendations associated with each tax break and other key pieces of information about how the tax system is performing. For various industries in Washington state, the report would detail effective tax rates, employment levels, average wages, and a breakdown of taxes paid.

Although HB 2134 includes important changes to the tax break system, it omits a key provision included in the 2014 bill that would greatly enhance accountability and transparency. Last year’s bill would have required large, publicly traded corporations to disclose to the public their total B&O tax payments in addition to the value of the tax breaks they receive each year. As we’ve highlighted previously, many major corporations, including Boeing and Microsoft, have a long track record of avoiding federal taxes. Requiring them to disclose how much they pay in Washington state taxes would shed light on whether they are dodging taxes here too.

Now more than ever, it is crucial that policymakers rigorously examine all forms of state spending – including spending on special-interest tax breaks – to ensure that those dollars are serving the public interest. If enacted, HB 2134 would be an important step toward creating a more balanced, transparent, and accountable process for measuring how our state invests in important public priorities.

Watch the Budget & Policy Center’s testimony on this bill here.