Legislature could lift corporate veil on tax breaks

The House approves a measure that demands more financial information in return for tax breaks.
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The House approves a measure that demands more financial information in return for tax breaks.

The state House wants companies seeking tax breaks to open their books enough to show how that exemption really affects them. A disclosure bill, approved by a 52-to-45 margin Tuesday, now goes to the Senate.

To the bill's sponsor Rep. Reuven Carlyle, D-Seattle, the legislation is needed so representatives and senators can know how much a tax break actually helps company. House Republicans oppose the concept, saying it opens up proprietary information people who should not see it.

Right now, legislators, with the exception of the House finance committee chairman and his Senate counterpart, cannot legally review financial information relating to tax exemptions that corporations want kept secret. So only Carlyle and Sen. Andy Hill, R-Redmond, can look at that information. And they cannot legally communicate what they see to the other legislators.

Without that information, legislators don't have a context in which to ponder tax breaks for industries, Carlyle said. A company with $2 billion in revenue should not need the same exemption as a firm with $100 million in income, he argued.  "I think it's unethical and unjust ... if we can't understand whether a tax preference is small, medium or large," he said.

"We need to make real decision on real data," said Rep. Ross Hunter, D-Medina.

Rep. Terry Nealey, R-Dayton, led the Republican opposition to Carlyle's bill on the House floor. "We have to be very careful about the release of proprietary information. ... That is a chilling effect on a lot of businesses in this state and on future, potential businesses," he said.

The House floor argument also touched on whether Washington's tax-break system — currently with about 650 exemptions — is put together well.

Rep. Chris Reykdal, D-Olympia, called the state tax code "nothing more than 100 years of random acts of kindness" due to the Legislature granting exemptions piecemeal. "This make the tax code more fair and less random," he said.

Rep. Ed Orcutt, R-Kalama, countered that the tax-break system has "not been random. It has been thought out. ... Thousands of jobs are in Cowlitz County simply because of tax exemptions."

For exclusive coverage of the state government, check out Crosscut's Under the Dome page.


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About the Authors & Contributors

John Stang

John Stang

John Stang is a freelance writer who often covers state government and the environment. He can be reached on email at johnstang_8@hotmail.com and on Twitter at @johnstang_8