There are big, overhanging financial and economic issues that are vital to our futures — the Greek debt crisis, our own long-term debt problem, the lingering mortgage/housing morass, and the inabilty of President Barack Obama and the Congress to enact a budget that will both foster near-term growth and contain long-term deficit spending.
The financial and economic issues facing state and local governments are, by comparison, trivial. But that does not mean they can be ignored. Here are some that bear watching, with a skeptical eye.
- The state budget and "tax expenditures": With less than a month left in the legislative session, our Legislature still has no credible plan to reduce the approximately $1.5 billion state deficit. New York and California remain deeply in the red but Washington is among a handful of other states that are still in deficit coming out of the national recession.
That deficit could be erased immediately if the Legislature chose to pare the long list of "tax expenditures" (i.e., loopholes, subsidies, deductions, and exemptions) that benefit favored sectors and companies in the state. At last tally, they added up at state and local level to three times the size of the state's biennial budget. Every Washington governor in recent years has pledged to review and pare them back. But, once elected, they have done the opposite. Gov. Gary Locke was the champion originator of these giveaways, which included during his tenure billions to The Boeing Co. so it would not move assembly operations to low-wage states (such as South Carolina). Gov. Chris Gregoire promised a thorough review but one of her first actions was to extend new subsidies to the biotech industry.
At the federal level, leaders of both political parties agree that a scrubbing of tax expenditures will be vital to deficit and debt reduction. They have been unable to agree thus far on where to start. These gifts to chosen industries and companies not only shrink the public revenue base; they distort competition and retard economic growth.
The local hero of the hour on this issue is state Rep. Reuven Carlyle, Democrat of Seattle, who has legislation (HB 2762), co-sponsored by state Rep. Glenn Anderson, Republican of Fall City, which would sunset these tax breaks and force their review on a rolling basis. He would exempt breaks relating to food, drugs, employee wages, and those required by the constitution or an existing legal agreement. The underlying concept: to challenge the continuance of these provisions into perpetuity and force their reassesment and, in many cases, expiration.
The proposal is too sensible to be immediately embraced. Rep. Jay Inslee, the Democratic candidate for governor, recently issued his jobs and economic-growth plan. He, too, pledged to review tax expenditures as governor but, in the same document, proposed new ones for job creators and for clean energy, biotech, and computer startups. He proposed to extend breaks currently in place for renewable-energy development and for companies investing in manufacturing and research.
State Sen. Ed Murray. Democrat of Seattle, the state Senate's chief budget voice, recently discussed his own proposals, which would include raising more money from capital-gains and sales taxes but, at the same time, also extend some breaks.
Whether at federal, state, or local level, there always will be proposals to extend special tax treatment to entities and activities deemed virtuous by their sponsors — and the elected officials who get their political and financial support. Any respectable economist will tell you that one cancels out another and that a tax favor or subsidy extended to someone will give it an unfair advantage over others — meanwhile creating huge holes in the public revenue base which must be filled by taxes from other sources. That is where we are in Washington.
Go, Reuven Carlyle.
- The NBA, NHL, and a new sports arena: Mayor Mike McGinn has assured voters that a prospective new SoDo arena, to house new National Basketball Association and National Hockey League teams, would be built without taxpayer subsidies by San Francisco hedge-fund manager Chris Hansen, a Seattle native and sports fan. Well, there might be some taxes attached to ticket and parking fees but, really, those should not really be called subsidies.
Some City Council members are properly skeptical. If rich guy Paul Allen could get subsidies for his football stadium and South Lake Union developments, and the Mariners for Safeco Field, how is it that Hansen and prospective NBA and NHL team owners would be able to do it without them?
Like what you just read? Support high quality local journalism. Become a member of Crosscut today!