Collaboration in Civic Spheres

New report: WA gives taxpayers $29.3 billion in special breaks

by February 1st, 2012

As Washington state lawmakers grapple with either raising taxes or trimming $1.5 billion from the 2011-13 state budget because revenue projections have failed to keep pace with planned spending increases, a new report issued Jan. 31 by the state department of revenue finds Washington grants a wide variety of tax exemptions which add up to $29.3 billion for the current two-year budget period. The biggest single breaks in taxes paid to the state are almost $3 billion in business and occupation taxes on employee income and retail and 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 what exemptions 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. (This is because once an exemption is lifted, the associated taxable business activity may decline in volume compared to before). 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 so 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

  • almost $3 billion on employee income
  • $935 million on insurance premiums
  • $673 million on investments by non-financial firms
  • $394 million on health maintenance organizations
  • Largest retail sales and use tax exemptions granted 2011-2013

  • $3.2 billion on personal and professional services
  • $2 billion on food and food ingredients
  • $1.6 billion on motor vehicle fuel and special fuel
  • Largest other tax exemptions granted 2011-2013

  • $1 billion in special fuel tax exemptions
  • $1.1 billion on the real estate excise tax
  • $950.7 million on vehicles used in commerce
  • $843 million on prescription drugs
  • Almost $797 million related to the estate tax
  • To date, there has been no comprehensive state review of the quantifiable economic benefits of the $29.3 billion in state-authorized tax exemptions in the current biennium.

    RELATED: State of Washington spending up 57 percent from 1999-2011, Public Data Ferret.

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