If tax breaks don’t work, it’s clawback time

By Sen. Maralyn Chase

Most state government programs are under regular review – if they don’t work, they don’t last.

The same cannot be said about tax expenditures – tax breaks given to corporations and placed on services in perpetuity. Many of these expenditures have been on the books for years. Some work, some don’t, some continue to serve a purpose and others are no longer necessary.

Whether they’re effective or not, these tax breaks have cost the state literally billions of dollars over the years and continue to cost taxpayers approximately a billion dollars each biennium.

The way things are set up in Olympia, the public and the legislature has no way of ending those expenditures which have served their purpose or were of a questionable purpose to begin with.

Recently, my colleagues in the Senate proposed several bills aimed at closing many of these loopholes. I support all of these bills and plan to introduce amendments for each one. These amendments will give lawmakers a mechanism with which to test these tax expenditures – essentially an audit – to determine whether or not the break is providing a net benefit to our state’s taxpayers.

If it is learned that the tax subsidy no longer serves its purpose or the entity hasn’t delivered a net benefit to the public whether through the number of jobs its created or employment hours its provided, the state will be able to recoup money through a so-called “Clawback” provision.

If the audit shows the tax break is serving its purpose – it will remain in place. It’s that simple.

The concept of a Clawback may seem like common sense. However, with the way many subsidy deals are structured, companies often face no penalties and the state has no course of action if they fail to deliver on promised jobs or investments.

The result of such lax enforcement is that taxpayers end up subsidizing companies for things they don’t do. With a $5 billion budget shortfall we need to account for every penny and make every dollar go further. Giving away billions of dollars in unchecked taxpayer money makes less sense than ever.

Clawbacks should not be viewed as a threat to business. Rather, they should be viewed as a tool that sets out clear expectations for parties on both sides of the table. If the rule is simple, fair and evenly enforced, businesses will accept it.

This is an issue of accountability and transparency. Taxpayers deserve to know what their money is paying for and legislators need to have the tools to get that money back if it’s not doing what it was intended to do.

The fact of the matter is, with the Tim Eyman-backed I-1053, we have little course of action.

Mr. Eyman’s initiative, which requires a supermajority vote to make any modifications to our tax code including the closure of tax loopholes, has left us unable to end or even modify any of these subsidies.

Below are a few of the tax breaks currently on the books:

• Elective plastic surgery
• Private airplane ownership
• Out-of-state coal purchases
• Non-organic fertilizer
• Heating and outfitting chicken coups
• Golf and country club membership fees
• Mortgage-interest earning for Wall Street banks

These few examples are literally millions upon millions of dollars worth of tax breaks that could be going toward reducing class sizes, saving the basic health plan or providing home care for our seniors and citizens with disabilities.

More than 20 states currently have some sort of Clawback provision on the books. If we’re really serious about fiscal responsibility, Washington State should be the next in line.

Sen. Maralyn Chase (D-Shoreline) represents the 32nd Legislative District, which includes north King and Snohomish counties.