Everett, Wash.
Published: Wednesday, March 5, 2008

Piecemeal tax breaks don't expand opportunity for all

By Marilyn Watkins

 A tax break for groomers of cross-country ski trails, or space for three more students in community college? Forgiving sales tax on the Tacoma Narrows bridge, or full-day kindergarten for 7,200 more 5-year-olds?

Lawmakers in Olympia are grappling with these questions as the House and Senate try to reconcile their competing budgets in the final days of the legislative session.

Tax breaks for newspaper Internet ads, historic vessels, beekeepers, and polysilicon manufacturers are among those still on the table, while catch-up pay for teachers and improved services for foster kids may be on the chopping block.

Every year, corporate lobbyists line the halls of the state Capitol seeking special tax deals. They claim that if Washington doesn't shell out, some other state will be happy to pay them to relocate. And they argue that because everyone else gets tax preferences, they should too.

It especially rankles when corporations raking in the biggest tax cuts then turn around and demand more state services. A few years ago, Microsoft CEO Steve Ballmer complained the company had to import college grads and urged the state to invest more in higher education. At the same time, Microsoft lobbyists were pushing for a renewal of high tech tax breaks, which the Legislature approved. That decision is taking $154 million away from public services in our current two-year budget.

Microsoft's annual piece of that pie would pay for 3,300 additional students at Washington's four-year colleges.

This year Microsoft teamed up with Yahoo to demand yet another tax break. They want the state to forgive half the sales tax for building computer server farms in Eastern Washington. With plenty of cheap, clean power (thanks to those publicly financed dams on the Columbia River) and inexpensive land, Eastern Washington is an ideal location.

The proposed "incentive" would be worth $32 million next biennium, and $43 million in the following budget cycle. But those server farms only provide 20 to 30 permanent jobs. The state could hire a lot more teachers with that kind of investment. Fortunately, it looks like this year the Legislature has the good sense to say no to Microsoft.

Most of the tax breaks still in play this year are pretty small. But they add up and balloon in future years. The House budget includes business tax breaks that cost only $5.6 million this year, but will drain $40 million from the 2011-13 budget. The Senate was more restrained, proposing tax breaks totaling $4.4 million now, and $17 million in later budgets.

In the five sessions from 2003 to 2007, the Legislature passed more than 80 new or renewed business tax deals, according to a recent report by the Department of Revenue. Those tax breaks are draining a whopping $600 million from the state's current two-year budget, but not one of them is up for reconsideration.

Teachers, foster families, home health care providers and advocates for children's health have to come back year after year to justify their place in the state budget, and face cuts whenever the economy turns sour. Corporate lobbyists, on the other hand, can dream up new tax breaks, knowing the ones they passed years ago are still secure.

Not all tax breaks are bad. One third of that $600 million loss is from the tax breaks Boeing negotiated for itself and in-state contractors in 2003. Since then, aerospace manufacturing has added 13,000 jobs in King and Snohomish counties, and 1,600 more in the remainder of the state.

Those jobs pay well above the state average wage. Many would argue that that investment was worth it.

And where would commercial agriculture and household gardens be without honey bees? Maybe beekeepers are facing a crisis and need a break. But the Legislature should include clear performance measures and an expiration date with every new tax deal. Even better, it should institute a policy of getting rid of one old tax break for every new one it passes.

The bigger question is, what's the best way to support a thriving economy in our state? Certainly it isn't by doling out piecemeal incentives to the industries with the best lobbyists. A better approach would be investing in high quality education, a modern transportation infrastructure, and strong public health and safety systems. These public services provide the foundation that help businesses of all types succeed, while offering real economic opportunity to us all.



Marilyn Watkins is policy director of the Economic Opportunity Instititue (www.eoionline.org ). Write to her in care of the institute at 1900 Northlake Way, Suite 237, Seattle, WA 98103. Her e-mail address is marilyn@eoionline.org.
© 2009The Daily Herald Co., Everett, WA