The sunlight of a public dialogue about tax exemptions
Today the House Ways & Means Committee voted 15-11 to send HB 2078 to the floor. I voted for the measure after a few quick, impassioned remarks. The bill would end a large tax exemption for big banks that costs taxpayers about $68 million.
Inside the committee room darkened by the ongoing Olympia rain, I was struck by the simple, gracious, no nonsense policy discussion between two legislators about the tax exemption policy. One Republican articulately argued that closing this tax exemption would have the negative effect of raising mortgage rates for the public. One Democrat responded with a gentle counter about the impact of K-3 on schools, and the fact that there is no appreciable difference in mortgage rates among states despite vastly different taxation models.
I was struck by the mundane normalcy of the interaction between the two respected legislators. It was a normal discussion, in a normal committee room, on a (not so) normal (special) legislative session rainy day, about a major public policy issue.
Except that this modest dialogue that few witnessed actually represents something profoundly wrong with our state’s representative democracy.
Because of I-1053′s requirements that we must have 2/3 to pass any tax or close any tax exemption among our current 567, we have in effect withdrawn so far as to even engage in a dialogue about tax exemptions.
Discussions about tax exemptions remain safely tucked away by the mist of dark political skies.
Because of our political perception that the public does not have an appetite for additional revenues (a view I believe to be 100% accurate) we have decided not to engage in the larger public dialogue. That is a different issue entirely.
It is our moral responsibility as public officials to educate the public about the implications of difficult and complex issues–to elevate the dialogue itself–not just to aim down by targeting the lowest common denominator of political fear, uncertainty and doubt.
I worked hard during the interim on the larger systems issue of tax exemptions. On this blog I have written about the issue itself many times.
Rather than attempt to close one, two or more particularly egregious tax loopholes, I was interested in a long term approach that outlined the broader structural challenges facing our state. My suggestion is that all tax exemptions should have an expiration date. No exceptions. Not homeless shelters run by non profits, not big banks, not tuition revenues for elite private schools, not R&D credits for high tech firms or agribusiness. Every tax exemption should be forced to engage in the process of proving the return on investment for tax payers.
For a variety of obvious reasons, the House leadership was unwilling to pursue this pathway this year. And so my bill sat quietly in the drawer all session. The Senate did make at least a meaningful effort in this area although it met a similar fate.
I am not, by the way, claiming that I don’t support tax exemptions. There are many that I would gladly sponsor to reauthorize or institute. And due to political popularity many of the 567 tax exemptions would, when up for renewal, fly through the Legislature faster than the start of the rainy season in Seattle.
But at least they would see the sunlight of a public dialogue. At least we would–like today’s dialogue in committee–debate whether the tax exemption worked or didn’t, helped or hurt, succeed or failed.
Today our committee passed a symbolic bill that will soon die a symbolic death. There is value and purpose in raising difficult issues and I support the open dialogue.
Still, I believe the public would rather see a bold, transparent and engaged political conversations about the systemic disconnect that exists in our state: It takes a simple majority to create a tax exemption that lives on forever. But 17 state senators can block the will of the majority of our 147-person Legislature to even place an expiration date on a tax loophole worth as little as a dime.
Tax exemptions are spending decisions. We should force all tax exemptions to justify their return on investment for taxpayers occasionally. We should require that they face the sunlight of representative democracy to prove their efficacy to the 147 elected representatives of the people. It is bad policy and bad politics to shield the public from a robust dialogue about whether a tax exemption is achieving the policy goals articulated when it was granted.
Does the tax exemption actually work? Has it created, supported or otherwise enabled jobs? Does it provide economic, social, environmental, financial or other value to the public that warrants continued existence? Can we quantify and measure the results? Did the companies deliver on their promises? Did labor or other partners succeed or fail in their promises when asking for (or arguably criticizing) the exemption in the first place?
Why is our Legislature so afraid of the sunlight of these questions about tax exemptions that we ask about spending decision everyday?
Why is the media so quiet and acquiescent about the lack of transparency about the 567 tax exemptions? No open records requests. No inquires.
I believe that at some point soon many in the media who care passionately about government transparency will join this larger cause. Not because they support closing the tax loopholes, but because they will eventually need to acknowledge that the lack of rigorous measurements, accountability and evidence of results starts to stretch the boundaries of the Legislature’s fiduciary obligations.
All of this does not suggest or imply that tax exemptions are inherently corrupt, inefficient or unwise. It is simply to suggest that the lack of sunlight of a rigorous public exposure and analysis means we can’t make a claim one way or the other.
This larger issue is, in the end, fundamentally about transparency, openness and a vigorous need for a robust public dialogue. We need to subject our state’s 567 tax exemptions to the same public rigor that spending decisions receive today.
No more and no less.
We are so much more than what we’ve become.
Your partner in service,
Reuven.
I-1053 may very well be unconstitutional. Why doesn’t the legislature pass this bill with a simple majority so the law can be tested in court?
Don, believe me, Reuven will assuredly attempt to override the will of the voters of this state to amend ANY proposed tax increase bill with a “simple majority vote” clause.
I am all for the “2/3 debate” making it to the Supreme Court (mainly so I don’t have to hear Big Government Progressives snivel any more), but seriously, it upsets me that my Representative plants his amendments in bills to get around I-1053 when he votes to increase our taxes. It seriously smacks of arrogance and lack of regard for the voters of this state and the initiative process.
As for transparency on exemptions, I actually couldn’t agree more with him.
Don(s),
Thanks much. First, we are trying to get I-1053 to the court so we can at least have a thoughtful analysis regarding constitutionality. If the court rules it is fully constitutional and a legitimate exercise of the people’s right to limit the scope of state government, I will, of course, stand down from my opposition.
Second, I’m not charging forward to overturn the will of the voters on any tax bill. The Legislature makes changes to initiatives all the time when important financial and economic circumstances change…teacher salaries, class size, health care training, 2/3 votes, environmental policy and more. It’s not easy to govern by initiative on either side because it locks our state down into a one size fits all model that is driven by special interests on all sides. Initiatives–a tool I strongly support–used to be used wisely. Now, anyone with $250,000 can put anything they want on the ballot regardless of financial implications for the state in the long term.
My broader frustration is our lack of transparency about how the money flows. Taxes and spending are pretty isolated from meaningful public review, and I hope to help change that. I have some new ideas for legislation next year around transparency that I think you’ll both like.
I appreciate the frequent comments you both make. I know you sometimes get frustrated but I hope you do feel I listen and try and respond to the broad range of our constituency.
I inserted language into the Metro bill (I suspect that’s what your referring to GD) because I felt it was inappropriate for the Legislature to place I-1053 obligations on King County. I-1053 clearly restricts the Legislature (as is the right of the people) but it is not appropriate for the Legislature to extend those obligations and restrictions to a local government, in my view. The Metro bill didn’t raise taxes but it did give King County authority to do so. I support strong local options so that legislators from across the state aren’t telling cities, town and counties how to manage their affairs.
As Jefferson reminds us, the level of government closest to the people is overwhelmingly most responsive to local needs!
Thanks again!
Reuven.
This is a great idea whose time will come. By defintion and implication, a tax EXEMPTION should be that – EXEMPT for the assumption that once a law is passed, it’s for perpetuity.
I hope this idea comes to fruition. those against it should bear the burden of why a tax exemptoin shoud not stand the scrutinity of defending a move into permancy.
Hey Reuven-
Thanks for taking the time out to reply.
Again, I support your drive for transparency with all exemptions (and, well, for everything really.) I do appreciate you striving to shine the light on things in this state.
Couple of quick comments:
“The Legislature makes changes to initiatives all the time when important financial and economic circumstances change…”
I find that bothersome. The majority of voters in the state find it bothersome too. That’s why they have made it loud and clear NUMEROUS TIMES that they want this kind of law to be upheld, illustrated by the recollecting of signatures and sending the message over and over again!!!!! The presumption that YOU don’t find it bothersome that the Legislature can (in essence) make a mockery out of the initiative process by just up-and-changing a voter-approved law without a re-vote, is ALSO bothersome to me. I guess I don’t understand how you wouldn’t see the “grey area” in your statement and just how frustrating it is to see our state legislators ignore this discernible cry from the voters of this state.
“It’s not easy to govern by initiative on either side because it locks our state down into a one size fits all model that is driven by special interests on all sides.“
Forgive me if I seem blunt here, but isn’t this how ALL state and federal politics work?
One-size-fits-all? Isn’t that the problem with government when they step outside their numerated duties and think as a collective, usually motivated by overall taxation? Here, here on Mr. Jefferson. Maybe if we actually followed that example our liquor laws might be different in each county. Or speed limits. Etc., etc.
The special interest comment makes me chuckle. Am I to assume from your comments that only voter-backed initiatives carry with them the weight of special interest dollars?
Surely, the Legislature has none of that, right?
“Now, anyone with $250,000 can put anything they want on the ballot regardless of financial implications for the state in the long term.
But wait a minute, can’t anyone with a net worth of 6 figures run for office and create laws?
I certainly know it would be difficult for most of us living in a lower socio-economic tax bracket to be involved in just the campaigning that goes along with that option.
And also, who says that state legislators are more responsible when it comes to “financial implications”? Seems to me, this state is in quite the financial quandary right now, and I don’t think we can rule out that many state legislators failed to scale back their individual programs, projects and agendas for a more financially prudent governance (that took in to account financial down turns)
Although I appreciate your opinions and your dialogue, I believe your logic to be a bit flawed in some of this response. It is also even MORE apparent in your reply that although you “support” the initiative-process, you may not actually like it much.
Best-
GreenwoodDon