As Washington state lawmakers grapple with either raising taxes or trimming $1.5 billion from the 2011-13 state budget, a new report has found that the state issued nearly $30 billion in tax breaks in the last two years. The report, issued Jan. 31 by the state Department of Revenue, found that Washington currently grants a wide variety of exemptions to taxpayers — exemptions which add up to $29.3 billion for the current two-year budget period.
The biggest breaks in taxes paid to the state include almost $3 billion in business and occupation taxes on employee income and retail, as well as use sales tax exemptions worth $3.2 billion on personal and professional services, $2 billion on food and food ingredients, and $1.6 billion on motor vehicle and special fuel.
Under state law the detailed report is issued every four years, but does not make recommendations on which tax breaks to maintain and which to end. Of the 642 exemptions granted, only 452 would be likely to increase revenues, the report states. Exemptions also refer to exclusions, deductions, preferential rates, tax deferrals and credits.
The report warns it’s not possible to say that the $29.3 billion in exemptions would yield the same amount in revenue if ended. Once an exemption is lifted, the associated taxable business activity may decline in volume. Of the $29.3 billion in tax benefits dispensed by lawmakers, $24 billion is due to exemptions from taxes paid to the state. Exemptions to retail sales and use taxes and the business and occupation tax together account for about four-fifths of that $24 billion in state tax benefits dispensed. Another $5.3 billion in state-authorized tax exemptions come at the local government level.
Included in the report is a summary listing of all tax preferences, which would yield some degree of revenue if curtailed. Others which exist but would yield no revenue if ended are labeled and marked in red. According to the itemized list, here are some of the largest state-level tax exemptions granted, which would produce some amount of revenue if lifted:
Largest business and occupation tax exemptions granted 2011-2013
Largest retail sales and use tax exemptions granted 2011-2013
Largest other tax exemptions granted 2011-2013
To date, there has been no comprehensive state review of the quantifiable economic benefits the $29.3 billion in state-authorized tax exemptions might have had in the current biennium.
This article originally appeared in Social Capital Review.