‘Claw back’ is good policy
Published 4:58 pm Friday, March 22, 2013
Tax policy is a barometer of political influence. Those with the sharpest elbows and the most loot snare exemptions. If a state budget gives expression to public values — including support for K-12 education and health care — tax policy is the undertow, the force unseen. Beneficiaries run the gamut, from software companies to newspapers (we feel partial to the latter, curiously enough.)
Many tax breaks goose major employers such as Boeing and Microsoft. And all loopholes merit strict scrutiny as well as an expiration date. Decade after decade, special interests finesse exemptions that are never revisited, even when there’s zero public value and no meaningful employment. This year, with Gov. Inslee promising not to raise taxes and the imperative to infuse $1-2 billion more into K-12 education, something’s got to give.
The Legislature is beginning to eye the books and identify savings. It’s a constructive exercise, especially for big-sector winners such as aerospace and agriculture. Will they preserve their exemptions? Probably. But it’s in the public interest to ensure loopholes are microscoped and have a documented public value. Because companies like Boeing drive public policy, especially support for higher ed and transportation, it might be useful for them to look at taxes through a main-street lens. What if they were paying the same percentage in B &O taxes as a downtown Everett merchant? (They won’t, but the exercise would be a learning experience.)
The state Senate is now poised to support an innovative bill, HB 1663, which contains what is known as a “claw-back” provision. The bill, which passed the state House 97-0 earlier this month, piggybacks on a 2009 tax exemption for hog fuel used to produce electricity, biofuel, steam or heat. Hog fuel is a wood-waste byproduct that powers boilers and provides electricity at pulp mills.
HB 1663 extends the hog fuel use and sales tax exemption through 2024, but it also incorporates critical reforms. A facility that accepts the tax exemption must identify the number of baseline jobs, wages and benefits as well as any jobs’ numbers that change during the span of the exemption. This and other comparative data is then analyzed by the nonpartisan Joint Legislative Audit and Review Committee and presented to lawmakers.
Here’s the claw back: If a facility closes and jobs are lost, with the employer often moving overseas or to another state, tax exemptions claimed from the previous two years become immediately due. Read: You can’t cash in and then bolt without paying.
The reforms and claw back are championed by House Finance Committee Chair Reuven Carlyle. Carlyle credits Snohomish County’s Sean O’Sullivan of the Association of Western Pulp and Paper Workers for the claw-back brainstorm. O’Sullivan spent his 40-year career at Everett’s Kimberly Clark mill. He witnessed the injustice of an exemption beneficiary shutting down, laying off hundreds of workers and not paying back its tax windfall.
The Legislature needs to pass HB 1663. It’s only fair.
