What else can be done about exemptions in Washington State

In a previous post I touched on the number of tax exemptions  and the impact they have on our state’s budget.  I also mentioned some of the complications that arise when trying to close exemptions.  With the increasing number of exemptions on the books and the limitations on the legislature’s ability to close those exemptions, the big question remains: what can be done to mitigate the impact of these exemptions in Washington State?

One interesting proposal, introduced during the 2012 Legislative Session, came in the form of HB 2530, introduced by Seattle Democrat Rep. Reuven Carlyle.  This bill, if passed, would have placed a mandatory sunset (expiration) date for all newly established exemptions.  Every 10 years an exemption would expire if not reviewed and extended by the legislature.  This would require the legislature to review an exemption and take deliberate action to extend that exemption if deemed necessary. 

This legislative proposal was a breath of fresh air in the exemptions debate.  So much of the debate has been characterized by extremes—one side calling for the closure of exemptions and the other refusing to consider any changes to the list of exemptions.  This proposal sits right in the middle by calling for a regular review that is based on sound economic principles, a review that is automatically triggered by a sunset.  This trigger would not be avoidable and would require careful consideration no matter how unpopular that discussion may be. 

Unfortunately, the legislation did not pass into law, but it did garner some media attention and added another facet to the tax reform debate in Washington.  Both Rep. Reuven Carlyle and Rep. Chris Reykdal spoke about this debate on an episode of TVW’s inside Olympia.  (click here for full video). This proposal addressed long term reform and, as written, would not provide immediate relief for Washington’s budget woes.  In this respect, this proposal is doubly refreshing in that it addresses larger long term systemic problems in our tax code.  In tough economic times, it is easy to become consumed with immediate action that provides instant relief.

The problems with Washington’s revenue system spans decades.  An undue obsession with short term solutions only compounds the problem by leaving the larger system failures in place.  If we do not take the lessons learned from the Great Recession to heart by addressing the larger systemic problems in our tax code, we are kicking the can of reform onto the coming generations which may be hit harder by future recessions.  Short term steps must be taken, but long term reform (like that introduced by HB 2530) is necessary.