Tax work group concludes three-city series of public meetings; still accepting written testimony

As we wrote in our newsletter Monday, there’s been little coverage of the three public meetings held by the House Tax Structure Working Group. Turnout was light for the first two meetings in Yakima and Spokane, a little better in Vancouver we’re told. 

The group was organized pursuant to  ESSB 6032,

to facilitate public discussions throughout the state regarding Washington’s tax structure. As part of this effort, the work group may hold up to seven public meetings in geographically dispersed areas of the state throughout the 2017-2019 fiscal biennium. These discussions may include but are not limited to the advantages and disadvantages of the state’s current tax structure and potential options to improve the current structure for the benefit of individuals, families, and businesses in Washington state.
TVW has posted coverage of the meetings in Yakima and Vancouver, so you can watch the staff presentations, discussion and public testimony. The staff presentation to the Vancouver group is available here.
The Lens reported on the Yakima meeting, leading with an observation indicating why structural changes are difficult.

A series of public meetings hosted by a state House work group highlighted the frustrations residents and businesses have with Washington’s tax structure. However, the discussions also emphasized ongoing disagreement over solutions, along with worries that any attempts to fix it could unintentionally make the tax structure even worse.

That sentiment was perhaps summed up best by House Finance Vice Chair Rep. Noel Frame (D-36) at the July 20 meeting in Yakima. “In Olympia, quite frankly we hear a lot of complaints about the tax structure, but not necessarily a lot of census on what to do about it. We really wanted to get out into the community, go around the state…to hear directly from you.”

Unsurprisingly, there’s little consensus “around the state,” either. From the Lens:

However, Washington Tree Fruit Association President Jon DeVaney cautioned panel members that changes to the tax code could have unintended consequences for fruit growers.

“Predictability is hugely important for agriculture,” he added. “They look at the tax code very carefully. They’re very nervous about potential changes to those rules after they’ve already invested in planting an orchard. If it’s a net increase to individual taxpayers in agriculture, that taxpayer does not have the ability to easily pass on those costs to their consumers.”

Similar concerns were raised by Vicki Baker, owner of Yakima Grocery Outlet. “Our (small) group felt that the current code is complex, and it is burdensome, but changes to it create quite a bit of uncertainty. The unintended consequences when you make changes can be very damaging.”

National tax experts point out an obvious challenge when it comes to addressing business taxes: For all the theoretical and practical objections typically raised about the B&O tax, the state tax structure works pretty well.

Also critical of the B&O tax was Tax Foundation Senior Policy Analyst Jared Walczak. In his written testimony to panel members, he noted that the state’s most recent B&O tax exemption study revealed “many of these exemptions are more narrowly tailored efforts to do what the different rates are supposed to accomplish: keep the tax from becoming an impossible burden for businesses with low margins or long production chains.”

He writes further: “Washington policymakers must ask themselves whether a particular (B&O) exemption is designed to enhance or undermine the tax’s neutrality. Is it designed to bring the taxation of one industry more in line with the taxation of other industries or to give it a particular tax advantage? Tax preferences which function as incentives merit close scrutiny, while those that attempt to rectify fundamental inequities may have greater justification. It is a balancing act.”

However, he adds that “the B&O’s shortcomings notwithstanding, however, Washington has a highly competitive tax code” and “relative revenue stability.”

Association of Washington Business Government Affairs Director Clay Hill wrote in a blog post we recommended last week that “We have a tax code that works for Washington.” Complementing Hill’s review is a Washington Research Council report that challenges the often-repeated characterization of Washington’s tax structure as “upside-down.”

If you want to contribute your thoughts on the state tax structure – and, really, who doesn’t – the committee has provided an opportunity to present written testimony. The link submit your views by email is here.