Spin, spin, spin …
Looking back to the recently concluded legislative session, we get two completely different stories regarding the Legislature’s fiscal responsibility. Democrats say that they passed a budget with almost $1 billion in reserves while making up for cuts that occurred during the recent recession. Republicans claim that the Legislature should have put more money aside, and not granted new funding.
State Sen. Joe Zarelli, R-Ridgefield, a particularly vocal grandstander, claims that the current budget is not fiscally prudent because of its impact on spending in future years: “Olympia politics is an add-on game. It’s not a deduction game.”
But let’s hold that thought, for while the back-and-forth rhetoric has been about spending for public services, no one is saying anything about the pile-on of deductions that take tax revenues and critical services out of the state budget. Tax exemptions, deductions, credits and miscellaneous tax breaks, endorsed by both Republicans and Democrats, threaten the state’s ability to maintain its investments in public services, not the funding of those investments that the Legislature undertook this year.
Before 2004, there were already 503 tax exemptions on the books, reducing state and local revenues for public services by $13.6 billion. To put that in perspective, the state’s general fund for 2005 provided $13 billion for services from K-12 education to health care. In the past three years, the Legislature passed 57 bills granting new tax exemptions or extending old ones. These cost more than $300 million in lost revenue in the last two fiscal years and will cost almost half a billion in the next two years.
Now that is a bow-wave of revenue loss, far outweighing the funds that the Democrats voted through for new services.
Zarelli himself authored the most inexcusable tax break that the Legislature gave out this year. I wrote about this one in February, and now we can see the damage.
In 1994, the people voted overwhelmingly, with winning margins in every county, to collect a pop syrup tax in order to fund the violence prevention and drug enforcement account. The tax generates about $9 million a year.
This year, McDonald’s and the Washington Restaurant Association persuaded the Legislature to reduce the other taxes they owe with an offset from the pop syrup tax, first at 25 percent this year, then at 50 percent next year and at 100 percent after June 2009.
It gets worse: If the tax credit is in excess of the tax, it can be carried over to reduce taxes in the next year. So not only did the Legislature put another hole in public revenue, but it made it get larger and larger each year. By the next decade, this will pinch state services by $10 million a year.
Why would the Legislature do this when there is a developing consensus that kids are drinking too much pop and that this feeds both childhood obesity and the increase in childhood diabetes? Our fast food nation is coming back to haunt us. The restaurant industry has added close to 14,000 jobs since 2000. It is not pinched. And with this tax break, the industry didn’t promise any more jobs, nor did the Legislature require any report on the impact of the tax break on jobs and consumer prices.
This multimillion-dollar giveaway is the result of a political decision, having nothing to do with good policy. Maybe the Democrats thought that if they did a special favor to the folks who fund campaigns against them, perhaps those folks would play nice. (Of course, with this tax break, these folks will have more money to throw around.) And the Republicans are happy to join in, because it seems that their idea of fiscal responsibility stops as soon as a business asks for a tax break.
Eighteen legislators voted against this bill, all Democrats, including Reps. Jeanne Darnielle and Dennis Flannigan of Tacoma, Dawn Morrell of Puyallup and Lake Forest Park Sen. Darlene Fairley. But the vast majority of our legislators endorsed this giveaway. Both parties are unwilling to confront the fact that you can’t make long-term investments for the greater good when, in the short term, you hand out giveaways to the lobbyists whose shoes have the brightest shine.
John Burbank, executive director of the Economic Opportunity Institute (www.eoionline.org), writes every other Wednesday. Write to him in care of the institute at 1900 Northlake Way, Suite 237, Seattle, WA 98103. His e-mail address is john@eoionline.org.
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