The Revenue Department recently released its 2008 Tax Exemption Report. The transmittal letter gives this overview:
The current study covers 567 tax preference items for major Washington state and local tax sources. The estimated savings for taxpayers resulting from these exemptions total $98.5 billion for the 2007-09 Biennium.
Big numbers, which always attract some media discussion. And Bill Virgin took a look at them in his PI column Tuesday. Virgin comments wryly on current proposals to give relief to honey and popcorn (read the column). And he acknowledges the widespread suspicion that exemptions
... exist because various special interests conspired in back-room, closed-door collusion with legislators to sneak those provisions in when no one was looking.
It's not that simple.
A read through Revenue's report suggests, alas, that the reasons are more complicated. Some exemptions exist on legal or technical grounds (federal or state constitutional questions about interstate commerce) or to prevent double taxation (if you run boxing, kickboxing, martial arts or wrestling events, you're exempt from the B&O tax because there's a separate, higher gross-receipts tax).
Some are intended to benefit consumers (sales tax exemptions on certain medical and health items, to reduce their cost) or encourage certain practices seen as beneficial to society (farm- and timberland are taxed at their current use, not at their "highest and best use").
And some are deliberately intended to help a specific business segment as an economic-development incentive. They range from huge programs for aerospace manufacturing or high-tech research and development to the small and obscure -- an exemption for firms that perform inspection, testing, labeling and storage services for salmon canners.
It's a thoughtful and worthwhile column. I wish he had included mention of the Citizens Commission for Performance Measurement of Tax Preferences, a group I served on for a while. Staffed by the Joint Legislative Audit and Review Committee, the commission is charged with establishing a process to assure that tax preferences are reviewed at least once every ten years. When the legislation establishing the commission was passed in 2006, I was skeptical. So far, however, I've been impressed with the professional and objective work that's gone into the review process.
There are plenty of reasons, good and bad, for tax preferences. The good ones can withstand periodic scrutiny.
