"If Labor and Democrats are for it, I'm against it." Let's hope that any opponents of reviewing and possibly rescinding some corporate tax breaks in Washington state can come up with better arguments than that. The Columbian reported yesterday that House Speaker Frank Chopp says it's a sure thing the legislature, in the current session, will establish a panel to review business tax incentives, with an eye to rolling some of them back.
I have a fairly visceral distate for Chopp, a hidebound apologist for public employee unions and Washington's Nanny State, and a conniving enemy of charter schools. On the flip-side of scrutinizing business tax breaks, serious performance audits of state programs and expenditures will never occur with Chopp, or Democrats at the helm in Olympia. Even though placebo legislation will likely pass this session after years of dithering.
But you take what you can get, when you can get it. And right now, the stars may be aligned for long-overdue "performance audits" of business tax breaks, as opposed to say, the train wreck that is DSHS. Whether this will amount to anything is another question entirely.
The current backdrop is a $1.8 billion gap in planned spending and anticipated revenues, and early talk of tax hikes in the Democrat-controlled legislature. Hikes in the "big three" taxes - property, sales and business - aren't thought likely. But before leaving office, Gov. Gary Locke floated a $600 million tax package including $100 million in taxes on doctors, plus new or increased revenues from soda pop, beer, wine and liquor, gambling, real estate excise taxes, college tuition and an array of user fees.
Meanwhile the legislature is scurrying to finalize a performance audit bill directing at existing government programs, while noted tax activist and initiative guru Tim Eyman pushes his own (I-900) performance audit measure.
The legislature's performance audit bill will be meant to symbolize greater scrutiny of government spending, but will be window-dressing only. Meanwhile, tax hikes won't go too far in the current legislature because the D majority in the Senate is a slim 26-23, and maverick Democrat Tim Sheldon and several others could easily cross over to the anti-tax side on any big vote. So the stage is set for a good hard look at tax breaks for businesses. Will Democrats do more than just "create a panel" this session?
Auditing tax incentives isn't a Leftist plot to drive business screaming from the state. Fiscal conservatives who justly believe all programs and expenditures should get the green-eyeshade treatment should hold business tax breaks to the same standard.
As the Seattle Weekly's Rick Anderson reported last year (in one of the paper's few worthwhile pieces), Washington grants 503 tax breaks or expemptions totalling $64.7 billion per biennial budget. As the table at the end of Anderson's piece shows, tax breaks are granted for all kinds of unusual things, quite apart from production of animal semen.
Even worse from a fiscal conservative viewpoint, there is no hard-and-fast reconciling of the assertion that business tax incentives help the economy. We do not accept hunches, or hopes that social programs improve the lot of the less fortunate. We demand (but don't get) best-practices audits to show what works and what doesn't in the realm of government-funded social and health programs. Yet applying the same standards to the billions routinely granted and quietly renewed in state tax breaks for business is somehow reflexively pilloried as anti-business. This is blatantly hypocritical.
As the Seattle Times' David Postman reported way back in 2003, there is strong belief (on the part of some) but scant actual evidence that corporate tax breaks boost the state's economy. (Link here, free reg. req.). Nonetheless, a shakedown mentality holds sway, with corporate beneficiaries of state tax breaks clearly implying they might move operations to other, more cooperative states if their special dispensations are taken away. We need to get off Shakedown Street.
What I fear we'll see is that state Democrats, while talking a good game about reviewing business tax breaks, will fall short because they are more like Republicans than they admit: they don't want to really rock the boats of monied campaign donors. In the same manner, state Republicans are more like Democrats than they admit: they failed to use their Senate majority last year to leverage a strong performance audits bill, or ANY performance audits bill, actually, because they don't really want further and exacting review of current programs and spending. A little symbolic nibbling around the edges works just as well in press releases and campaign fliers.
And so it will go, until an honest bargain is struck. But that would require real engagement from the silent majoity of voters who receive no state government subsidies at all. And we are largely content to keep our heads down and stay out of the way.
Posted by Matt Rosenberg at January 25, 2005 11:13 AM | Email ThisShe laughed, but didn't change the name.
Posted by: Matt J Kurlander on January 25, 2005 11:42 AMHowever, with the D's firmly in control, we can expect much more such nonsense, as ever more businesses leave our state.
Posted by: Kevin S on January 25, 2005 11:57 AMOk I think I am done ranting. :)
Posted by: Jon on January 25, 2005 12:40 PMEspecially the great Boeing giveaway.
Billions are given over to Boeing, who will create nearly no jobs for our state, and perhaps even eliminate some of them.
Yet small business, the real economic engine, the real creator of jobs, is shut out cold.
Small business doesn't have an army of lawyers, nor a platoon of lobbyists in a house down the street from the capitol as Boeing does, neither can they elicit political fear by threatening to remove jobs as Boeing does.
Washington is paying a heavy price for Boeing blackmail, and the failure to promote small business.
Posted by: Steve Ramsey on January 25, 2005 12:59 PMAs Steve Ramsey points out, small businesses are being shut out in this state in favor of tax breaks for the big kahunas. And small businesses bear a huge burden with respect to business regulations in this state.
Posted by: Larry on January 25, 2005 01:04 PMThe plan to review tax breaks for large businesses makes me think of J. Wellington Wimpy, from the old Popeye cartoons, when he would say, “I’ll gladly pay you Tuesday for a hamburger today.” In this case, Frank Chopp will be saying, “We’ll gladly reduce overall business taxes next year if you let us increase these business taxes this year.” Somehow, when next year comes, the taxes reductions will not materialize.
Why is it such a foreign concept for the State to operate wisely and efficiently? As is shown by the current election morass, government holds itself to a lower standard than it expects from business.
The legislature is a joke, the Dems. just want to rubberstamp everything Gregoire wants, no questions asked. We need to continue to highlight examples of hypocrisy, while suggesting our own innovative and original creative solutions.
Cut all non-essential services! Close down the parks, remove and further limit agency FTE's, average the sales tax to the same level in every county, privatize and audit DSHS, scale back expensive transportation projects where possible, and ask give Gregoire a pay cut!
Posted by: CR ACTIVIST on January 25, 2005 01:15 PM
- I agree. It should be taken one step further. Most companies have moved towards lean / six sigma concepts for both manufacturing and white-collar efficiency in order to compete. Why can't our govenrment do the same thing. When we freeze or reduce the budget, it needs to be done in an intelligent and stuctured manner. We can start by placing people directly accountable for their actions. For example if the DSHS was a corporation the entire leadership team would be sacked by the board of directors. The same needs to be inplace in our government agencies. The message is do a crappy job and your cushy job is history. Not life long employment for sub-standard morons who couldn't get a job in the private sector.
Posted by: South County on January 25, 2005 02:36 PM
I appreciate the idea and think it has merit. If sunset provisions for programs is a good idea (and I think it is), the same holds true for tax "programs". However, the comments to this point demonstrate how difficult this will be. Every one has an ox they want to gore and a sacred cow they want to protect.
Posted by: Steve on January 25, 2005 02:40 PMMore to the point, another D.O.R. study, as Anderson reported, sets a more modest goal: recovering just $13 billion of that total each biennium by collecting suspended retail and use taxes.
Still a hefty order politically, but the conversation needs to start in earnest. suppose we only got half or a quarter of that $13 billion back. That would still do an awful lot.
Posted by: Matt Rosenberg on January 25, 2005 03:05 PM"We're unable to determine whether the department has complied with federal eligibility and compliance laws. We think that's the result of deliberate effort of Medicaid personnel to prevent our audit," Sonntag said. "All we can do is issue an audit report that disclaims ... the entire Medicaid program, which has a budget of $6.1 billion."
A federal inspector could determine whether the department is hiding information or the auditors are misinterpreting the federal rules, Braddock said.
"In our opinion, the state auditor does not have a good understanding of the requirements of Medicare and Medicaid," he said."
http://www.theolympian.com/home/news/20041215/topstories/49744.shtml
The article has a link to the audit.
Small service businesses are the ones receiving 'THE SHAKEDOWN'. It needs to stop. We are holding up this state!@
Posted by: Michele S on January 25, 2005 06:54 PMThe name Dino Rossi comes to mind. So does the phrase "Change in government culture."
Personally, I'd love to see an element of personal cost introduced into situations of public mis/mal performance. Oh, and the phrase "Cris (don't call me temp) Gregoire" comes to mind.
Btw, didn't the former AG's term in office coincide with a relaxation of the personal bankruptcy laws? Just curious.
Scott158 (not that scott)
Posted by: scott158 on January 25, 2005 07:41 PMSmall service businesses are the ones receiving 'THE SHAKEDOWN'. It needs to stop. We are holding up this state!@
Posted by Michele S at January 25, 2005 06:54 PM
So true, not helpful to small businesses. And frankly I would complain less about the high B&O tax if that money was not going right into the general fund but being used to help promote and support small businesses....like maybe a way to get lower cost health insurance for a start?
Matt, I don't believe in Santa Claus or free money. Draining this amount of money out of the private sector will have real consequences (besides the political ones.) It's not just a political issue.
Posted by: South County on January 26, 2005 05:39 AMHB 1064 allows for independent, comprehensive performance audits of government agencies. A Citizen Oversight board works with the State Auditor to prioritize the audits, and the Auditor contracts to outside firms to conduct them. Brian Sonntag, long a proponent of performance audits supports this bill. Ask him.
As for HB 1069, it to creates a citizen advisory board that helps prioritize performance audits of all tax expenditures (credits, exemptions, incentives, etc.) over a ten year period. The audits themselves are performed by JLARC. The citizen board can choose not to review tax expenditures either because they cannot be repealed (exempting church property for example) or they are integral to our tax structure (the sales tax exemption on food.)
There is nothing radical or extreme about either bill -- if anything, 1064 is much more firm than 1069. And they are both about one thing: accountability.
An agency expenditure and a tax expenditure do the same thing... they drain the general fund in exchange for an expectation of some social or economic benefit in return. The purpose of these performance audits is not simply to suggest which programs or incentives to eliminate, they will tell us how to use these expenditures more efficiently. Why wouldn't you want to review a tax incentive every once in a while to see if it is performing as promised? If it's not, that money can be used for some other, more efficient incentive.
It just seems hypocritical to support one bill and not the other.
Posted by: David Goldstein on January 26, 2005 11:11 AM"'Why wouldn't you want to review a tax incentive every once in a while to see if it is performing as promised?"
If you re-read my post more carefully, the full extended post, you will see I am very much FOR reviewing current tax incentives. I would be very pleased if at least a few billion dollars worth of them were rolled back, something that neither Chris Gregoire or Dino Rossi would probably have the guts to support. I am just skeptical that the legislature will ever really manage to build some momentum on that issue.
As for the current performance audits legislation to evaluate existing programs and spending, I agree 1064 sounds a lot better than 1069. JLARC is, in my estimation, a lap dog of the legislature, and a citizens oversight committee is fairly toothless by its nature.
The larger question is what would happen after each round of audits authorized under, say, HB 1064, were completed. Would documented inefficiencies actually be eliminated? Would recommendations actually be followed to dramatically scale back, altere or eliminate certain programs?
A legally-enforceable hammer is needed to ensure performance audit findings are actually implemented.