Cutting Tax Giveaways as a Budget Reduction Alternative

Washington Federation of State Employees/AFSCME Nov. 28, 2011

Table of Contents
Sensible Solution Other Voices: Doing Nothing is Not an Option Overview of Ideas for Cutting Tax Giveaways Eleven Ideas from the Economic Opportunity Institute Nine Ideas from Our Economic Future Coalition An Idea from Sightline An Idea from WFSE/AFSCME Two Ideas from the Citizen Commission on Performance Measurement of Tax Preferences Three Ideas from Senate Bill 5947 Appendix: Governors Recommendations 2 3 8 9 11 12 12 13 13 14

Cutting Tax Giveaways to Raise Revenue for Public Safety Public Services Higher Education Most of the budget gap, says Marilyn Watkins, policy director at the Economic Opportunity Institute, could be paid for by repealing tax breaks such as the one the state provides to banks for profits they make on home mortgages. Theres absolutely no evidence that that tax break has done any good for consumers in Washington or homeowners in Washington state. The only benefit is to banks who have gotten their big bailout and are doing quite well now. Gov. Chris Gregoire has expressed concerns that ending tax breaks could cost the state jobs. However, Watkins says there is no evidence the breaks produce jobs, adding that $167 million in new revenue could come from the banking sector alone each year. By ending similar tax breaks and applying modest tax increases to oil refineries, high-tech and agribusiness, she estimates that $1 billion a year in progressive revenue could be generated.... By cutting so much, were not only hurting peoples opportunity and life chances and even their ability to live at all in some cases, but its hurting our economies too. Watkins blames that last round of budget cuts for slowing the pace of the recovery, which she says cost the state as many as 45,000 jobs. More job losses are in store, she says, if lawmakers focus solely on budget cuts during the special session. If we cut another $2 billion, thats about 15,000 jobs that we are going to lose in the private and public sector across the state.

Sensible Solution:

-- Washington News Service, 11/21/11

Cuts to higher education system could well be catastrophic

A report issued by the Washington State Budget & Policy Center, a Seattle-based, progressive think tank, confirms that the higher education impacts noted here are applicable around the state. The report said: The average cost to attend college in Washington state has risen 94 percent since 2007 at four-year institutions and has risen 54 percent at community and technical colleges. Current proposals would cut an additional 15 percent of state support from higher education. More than 20,000 eligible students were unable to receive financial aid in 2010 due to insufficient state resources. Financial aid for 70,000 students is on the line in the next round of budget decisions. The study demonstrates the dramatic shift in higher education funding policies in this state over a relatively short period of time.

-- The Olympian, 11/21/11 http://www.theolympian. com/2011/11/21/1885099/cuts-to-higher-education-system.html#storyli

The Schrammie: An unconscionable plan

Saving money by sacrificing the elderly and vulnerable. Trimming the budget by turning out those who cant fend for themselves. Id like to invite Western State Hospital officials to turn off the electro shock therapy machine and come on down. Facing yet another shortage of state cash, the state psychiatric hospital is working up a plan to dump elderly mental patients into community nursing homes and caretaker homes that are not equipped to deal with them.... Targeting the vulnerable; plotting to send violent and aggressive mentally ill patients to area nursing homes is, quite frankly, unconscionable.

If Western State authorities think thats an answer to budget shortfalls, they need to think again. -- KOMO TV 9/28/11 3

DOC rule changes leave thousands of offenders unsupervised

SEATTLE -- Tragedy is inevitable, according to insiders at the Department of Corrections. A KOMO 4 Problem Solver investigation has uncovered disturbing information about new DOC rules that are putting thousands of sex offenders on the street with little or no oversight. These rules drastically change how they keep tabs on dangerous sex offenders. Victims Katie, Annie and Rob fear they are living on borrowed time. The criminals convicted of sexually assaulting them or their loved ones are free. And because of policy changes and new laws, no one from the Department of Corrections is watching. They are just three of thousands of offenders no longer getting any DOC supervision. Rob sums it up this way: Its an accident waiting to happen. DOCs community corrections officers still keep tabs on thousands of offenders across Washington state, making unscheduled visits to homes and workplaces for the worst offenders. But over the past couple of years, legislators enacted huge changes, cutting more than 80 positions to save some $25 million. Now thousands of sex offenders who used to be intensively supervised arent. I think the public could be safer, said Iris Peterson, a community corrections officer who spoke to KOMO News in her role as a union spokeswoman. When asked if it was just a matter of time before these changes result in tragedy she answered, It could be, unfortunately. -- KOMO TV, 10/31/11

And she looked at me and stopped breathing

UNIVERSITY PLACE, Wash. -- Keisha Lewis took her last breath in her best friends arms, and now that friend is speaking out about the burst of violence that shattered a family. Latasha Taylor was with Lewis Monday night when she was stabbed to death outside of her University Place home. Investigators believe Lewis former boyfriend, Joseph A. Lester, brutally murdered her before fleeing with their 9-month-old daughter.... Lester is now in jail, and were learning more about why he wasnt under state supervision at the time of last nights murder. 4

A judge ordered Lester to be supervised for 36 months when he was released from prison on a robbery conviction in 2009. But thanks to a newly-passed law, Lester was not under supervision. The Department of Corrections was forced to stop supervising 10,000 offenders after a 2009 law was passed to save money, and because Lester was classified as low or moderate risk, he was one the offenders lost in the shuffle. Lawmakers said research showed ending the minimal supervision for these types of offenders wouldnt increase crime rates. A report on the impact of the new law will be presented to the legislature next month. Meanwhile, the governor has ordered the DOC to look at even deeper cuts due to a growing budget shortfall. -- KOMO TV, 11/1/11

State Budget Cuts A Direct Threat To Spokane Community?

SPOKANE, Wash. -- A $2 billion revenue shortfall has Washington Governor Chris Gregoire preparing to make drastic cuts to many state programs. The Department of Corrections is on that list. Community corrections officers in Spokane said thats a direct threat to the publics safety. Ten years ago Kevin Duane Musgrove was convicted of 1st Degree Child Molestation. When he got out of jail he was placed on probation, but budget cuts shortened the length of time that he was supervised. Now the state is looking to cut budgets again. I think our number one concern is public safety, and were in the community too, Tim Foley, a Department of Corrections Employee said. We think about our neighbors, our family, our friends, Foley added. Tim Foley has worked for the Department of Corrections for 36 years. He knows that each offender has a different story. It varies case to case, Foley said. However, community corrections officers are worried that the most recent budget cut proposal would mean offenders such as Musgrove wouldnt get any supervision. And some of these guys you cant get them to change. You need to supervise them, and know what they are doing at all times. Again for pure public safety, Foley said. -- KXLY TV, 11/4/11 5

Gregoires list of recommendations....closes the Rainier School for the developmentally disabled near Buckley.

-- Tacoma News Tribune, 10/27/11

When same plan was proposed last year: Supporters say the closures would integrate patients in communities instead of having them live on campuses set apart from the rest of society. Opponents say the closure will rip residents away from a home where they have lived for decades and away from the care they need. Lakewood resident Bob Gees daughter Angela has been a resident of Rainier School for more than two decades. Twice, he moved Angela to a smaller institution. Both times, he said, she almost died from seizures because there were not enough employees to watch over her 24 hours a day. Its very admirable to believe that they could live on their own, but when you have someone with the ability of a 2-year-old or 3-year-old, its wishful thinking, he said. Its naive and its deadly to believe that these people can be integrated into society.

-- Associated Press, 2/14/10

Eliminating Washingtons Basic Health Plan will hurt economic recovery

The health-care needs of these residents wont disappear just because public programs go away. When individuals dont have health coverage, they seek help from hospital emergency departments. That means were treating people when theyre sicker and we are treating them in an expensive setting that is not geared toward chronic-disease management or prevention. It also means higher costs and longer wait times for those who do have coverage. The Basic Health program has played an important role in extending the safety net to provide coverage to many low-income people who cant afford to purchase coverage on their own and dont qualify for Medicaid. Its much easier to retain an infrastructure than to build a new one from scratch. Simply put, leaving people without health insurance lengthens the recession and imposes costs on us all. We agree with Gov. Chris Gregoire her initial all-cuts budget isnt one that the Legislature should adopt. The Basic Health program should not fall victim to budget cuts, especially now, when theyre needed more than ever. 6

-- Seattle Times, 11/21/11

Closing NYC could be catastrophic; JRA closure would ripple through Naselle, county
NASELLE While planning to save Naselle Youth Camp as they have in the face of several previous closure threats, key community members warn of crippling economic and social consequences if the state reform school is shuttered as recommended by the governor. -- Chinook Observer, 11/8/11

Survey says: NYC ahead of JRA average for residential treatment programs
NASELLE In April 2011 the Quality Assurance Team from the Juvenile Rehabilitation Administration (JRA) collected data from across their residential programs addressing areas related to treatment received and how the treatment and skills will work outside the JRA facility. The results of the survey were overwhelmingly positive for Naselle Youth Camps (NYC) overall performance as an extremely effective rehabilitation facility in Washington.

-- Chinook Observer, 11/15/11

Cut could eliminate interpreters for thousands

About 70,000 Washington residents who have limited English may lose access to interpreters during medical visits under a proposed budget cut. -- Associated Press 12/11/10

On the chopping block again--even though Medical Interpreters have proven value for the state: (State Sen. Ed) Murray said interpreters are needed to help prevent health problems for patients and legal liabilities.... The budget also requires the state to revamp its interpreter system, which now pays about eight independent brokers, who in turn farm out work to foreign-language agencies that do the hiring and assigning of interpreter work. A new system due after Jan. 1 eliminates brokers and uses online scheduling tools. Federation organizer Sarah Clifthorne said the double-layer of administration led to 44 percent of state payments going to middlemen. There also were illogical assignments with Tacoma-based interpreters going to jobs in Seattle and vice versa, she said.

With the changes, Clifthorne said, the state will stop wasting money and it will help interpreters make a living. Right now they spend all their time driving around. -- The Olympian, 7/3/11 7

Budget Reduction Alternatives: Cutting Tax Giveaways

November 2011

OVERVIEW: 27 Ways to Cut the Deficit by Cutting Tax Giveaways

Here are just 27 tax giveaways that six groups propose cutting. The special legislative session could raise $2.3 billion by closing them. Thats more than enough to cover the $2 billion budget deficit. There may be some overlap. But we can all agreecutting tax giveaways is better than devastating cuts to public safety, public services and higher education. GROUP/IDEA Economic Opportunity Institute
Repeal 1st mortgage deduction Repeal 1st mortgage deduction for banks in more than 10 states Sales tax exemption on custom software Sales tax on financial planning, investment advising, securities trading B&O pop syrup credit/increase pop syrup tax B&O tax exemption for farmers with gross income above $200,000 Sales tax exemption for non-organic fertilizers, sprays and washes Use tax exemption on extracted fuel Non-resident sales tax exemption Motor vehicle fuel sales tax exemption Public Utility Taxes (PUT) (modernize interpretation of Interstate Commerce Clause) Private jets Display items/trade shows Elective cosmetic surgery Out-of-state coal Out-of-state shoppers Consumer services Christmas tree production Fish tax exemption B&O tax exemption/fish cleaning services

SAVINGS
$ 50.8 million 20.0 million 31.2 million 46.9 million 16.7 million 32.7 million 44.6 million 25.6 million 19.3 million 803.2 million 248.5 million 5.0 million 2.0 million 8.0 million 11.0 million 44.0 million 100.0 million .5 million .340 million .011 million 344.0 million 450.0 million 3.2 million 40.8 million

Our Economic Future Coalition

Sightline (progressive green think tank) WFSE/AFSCME

Trade-ins to car dealerships sales tax exemption 3% furlough on corporate tax breaks Hog fuel Renewable energy machinery

Citizen Commission on Performance Measurement of Tax Preferences

SB 5947 (An act relating to repealing certain tax exemptions to provide funding for essential government services)

Bull semen used for artificial insemination; chicken bedding; propane or natural gas to heat chicken structures 7.041 million

TOTAL:
.

$2,355,392,000

Budget Reduction Alternatives: Cutting Tax Giveaways

November 2011

11 Ideas from the Economic Opportunity Institute

Revenues to Rebuild Washingtons Economy Ending tax exemptions to restore jobs and opportunity Washington lawmakers have slashed billions of dollars from the state operating budget since 2008, crippling individuals, schools, and communities in every part of the state. Meanwhile, tax breaks for the wealthiest people and corporations undercut investments in the education system and infrastructure needed to create jobs and get our economy moving again. Its time to modernize Washington tax code by ending tax breaks and expanding the tax base to reflect Washingtons 21st century economy. Here are some options:

Repeal 1st mortgage deduction $50.8 million Since 1970, credit agencies can deduct interest earned from loans for first mortgages on residential property. JLARC found no evidence that the tax savings is passed on to consumers, and big banks are profiting. Repeal 1st mortgage deduction for banks in more than 10 states Sales tax exemption on custom software axed in 11+ other states. Would not include canned software. Sales tax on financial planning, investment advising, securities trading B&O pop syrup credit and increase pop syrup tax from $1 to $2 B&O tax exemption for farmers with gross income above $200,000 Sales tax exemption for non-organic fertilizers, sprays, and washes $20.0 million $31.2 million $46.9 million $16.7 million $32.7 milliion $44.6 million

Use tax exemption on extracted fuel $25.6 million Primary beneficiaries are wood product industry and oil refineries. Generally businesses that produce and use tangible personal property owe a use tax, but extracted fuel has been exempt. 45 other states have a use tax; only 1 exempts petroleum-based extracted fuel.*
* Based on JLARC estimates.

Nonresident sales tax exemption change to refund if over $25 per year Repeal sales tax exemption motor vehicle fuel 9

$19.3 million $803.2 million

Budget Reduction Alternatives: Cutting Tax Giveaways 11 Ideas from the Economic Opportunity Institute (continued) Public Utility Taxes (PUT) (modernize interpretation of Interstate Commerce Clause):

November 2011

$248.5 million

Repeal PUT exemption on Instate portion of interstate transportation Public Utility Tax tax is not charged on the transportation of goods or people if any part of the trip is out-of-state. JLARC recommends ending the exemption. 46 states and DC already tax.* $30.6 million Repeal PUT exemptions on through freight and shipments to ports Two PUT deductions were enacted in 1937 specifically dealing with goods transported from one part of the state to another for storage or processing, then transported out of state. JLARC also recommends ending it. 45 states tax. $23.7 million Repeal jet fuel tax exemption for commercial airlines and local commuter business A jet fuel tax of 11 cents per gallon has been limited to private purchasers to support local airports and avoid violation of the US Constitution. But the funds are now used more broadly to benefit all aviation and the interstate commerce clause has been reinterpreted to allow broader taxation. Only 2 other states exempt fuel for use in interstate commerce.* $55.2 million Repeal sales tax exemption on items used in interstate commerce Air, rail, and water transportation companies engaged in interstate or foreign commerce are exempt from sales tax on fuel and other items. U.S. Supreme Court has ruled that states may tax such items, and many do. JLARC review in 2008 found no clear purpose for the exemption. At least 10 states explicitly tax airline fuel.* $139 million

SOURCE: http://www.eoionline.org/state_economy/ index.htm; Revenues to Rebuild Washingtons Economy; A Jobs and Economic Recovery Plan for Washington.

10

Budget Reduction Alternatives: Cutting Tax Giveaways

November 2011

9 Ideas from Our Economic Future Coalition

Protect Our Future End Unfair Corporate Tax Giveaways Special tax giveaways cost Washingtonians billions of dollars every year. Thats money that should be going healthcare, education and other essential public services. Below are some examples of unjustified corporate tax giveaways. Special tax break for private jets: $5 million per year $5 million Owners of private jets currently pay a flat fee, regardless of the size or value of their jet. Very wealthy private jet owners should pay their fair share. Sales tax exemption for display items for tradeshows Sales tax break for elective cosmetic surgery Includes: teeth whitening, and laser eye surgery. $2 million $8 million

Sales tax break for out-of-state coal: $11 million per year $11 million Sales tax is exempt on coal used at coal-fired thermal electric generation facilities. Sales tax break for out-of-state shoppers $44 million Currently, out-of-state shoppers from Oregon, some Canadian provinces, and other states that have a sales tax rate of less than 3 percent are not required to pay the sales tax on purchases made in Washington. Sales tax break for consumer services $100 million Includes: hair removal, massages, movie theaters, beauty parlors, acupuncture, sporting events, investment advice, and many others. B&O exemption for Christmas tree production Fish tax exemption for tuna, mackerel and jack B&O exemption for fish cleaning businesses $0.5 million $0.340 million $0.011 million

SOURCE: http://oureconomicfuture.org/; taxgiveaways.pdf.

11

Budget Reduction Alternatives: Cutting Tax Giveaways

November 2011

Sightline
Washingtons $450 Million Tax Giveaway For Cars: Car dealerships versus public education: the legislature decides.
http://daily.sightline.org/2011/10/27/washingtons-450-million-tax-giveaway-for-cars/

Trade-ins to car dealerships sales tax exemption7

$344.0 million

Over at Sightline, Eric de Place has identified a way to knock out one-fifth of the budget shortfall$344 millionby closing a single tax loophole. Even better, closing the loophole would provide $106 million in tax revenue to local governments, which are facing revenue shortfalls of their own. The loophole: A sales tax exemption on trade-ins to car dealerships. Currently, if you trade your used car for a new one, you only pay sales tax on the value of the new car minus the value of the trade-in. In contrast, if you sell your old car without buying a new one, you pay sales tax on the full value of the used vehicle. Essentially, its a giveaway to car dealerships. It also benefits wealthier drivers with high-priced cars they trade in frequently over low-income people who are less likely to drive, and more likely to own older cars that they maintain (instead of trading them in) if they do. -- publicola.com 10/27/11

SOURCE: http://daily.sightline.org/2011/10/27/washingtons-450-million-tax-giveawayfor-cars/; http://publicola.com/2011/10/27/sightline-heres-a-tax-loophole-that-couldsave-450-million/.

WFSE/AFSCME

Companies enjoying tax breaks should give three percent back The state workers union meant to be combative. But last week, in throwing down the political equivalent of a schoolyard taunt, I think they hit on an idea with legs. Specifically what the union said was: Youre asking us for another 3 percent cut in health benefits. How about convening a meeting of corporations to ask them to give up 3 percent of their tax breaks? - Danny Westneat, Seattle Times, 10/30/11 3% furlough on corporate tax breaks $ 450.0 million

According to the state Department of Revenue, there are 567 tax exemptions, incentives and breaks in the state tax code that, if they were all repealed in full, would raise $15 billion in revenue for the government. Obviously, doing that would be outrageous. But what if the corporate world was asked to give the same as the unions three? Not a 3 percent increase in their base tax rates. Just forgo 3 percent of the value of their tax breaks (which by their nature are special carve-outs, anyway.) That would be $450 million in new revenue. Amazingly enough, thats enough so we dont have to throw the poor off health insurance, dont have to cram school classes any more than they are and dont have to slash the university system. - Danny Westneat, Seattle Times, 10/30/11 SOURCE: http://seattletimes.nwsource.com/html/dannywestneat/2016643494_danny30.html. 12

Budget Reduction Alternatives: Cutting Tax Giveaways

November 2011

Citizen Commission on Performance Measurement of Tax Preferences

Summary of 2011 Tax Preference Performance Reviews -- Recommended Repeals: Hog Fuel to Produce Energy (Sales & Use Tax) $3.2 million

Provides sales and use tax exemptions for hog fuel used to produce electricity, steam, heat, or biofuel. The Legislature did not specifically state a public policy objective for these preferences; however, it did make the preferences temporary. Because of the sharp declines in oil and natural gas prices occurring at the time that the preferences were enacted, JLARC infers that the Legislature may have intended to temporarily make the price of hog fuel more competitive. Allow to expire: Because the Legislature intended the exemptions to be temporary and did not provide performance goals to guide any other assessment of performance. Renewable Energy Machinery (Sales & Use Tax) $40.8 million

Provides sales and use tax exemptions for renewable energy machinery and equipment used directly in generating electricity from wind, sun, fuel cells, biomass energy, tidal or wave energy, geothermal resources, anaerobic digestion, and technology that converts otherwise lost energy from exhaust, or landfill gas into electricity. The Legislature did not specifically state the public policy objective of these preferences; however, it did make the preferences temporary. JLARC infers that the Legislatures public policy objective was to encourage and support generation of electricity using renewable energy sources on a temporary basis. Allow to expire: Because the Legislature intended the exemptions to be temporary and did not provide performance goals to guide any other assessment of performance. SOURCE: http://www.citizentaxpref.wa.gov/reports.htm.

Senate Bill 5947

An act relating to repealing certain tax exemptions to provide funding for essential government services Bull semen used for artificial insemination; chicken bedding; propane or natural gas to heat chicken structures $7.041 million Under current law, there are retail sales and use tax exemptions for the following: (1) sales to ranchers of semen used for artificial insemination of livestock; (2) sales to farmers of propane or natural gas exclusively used to heat structures that house chickens that are sold as agricultural products; and (3) sales of bedding materials to farmers who raise chickens for sale as agricultural products. Summary of Bill (Proposed Substitute): The retail sales and use tax exemptions for semen used for artificial insemination of livestock, sales of propane or natural gas exclusively used to heat structures that house, and sales of bedding materials to farmers who raise chickens are repealed. SOURCE: http://apps.leg.wa.gov/billinfo/summary.aspx?bill=5947&year=2011. 13

(Dollars in Thousands)

Appendix Requires majority vote of the public

RECOMMENDATION TO CITIZENS
Increase state sales tax rate temporarily from 6.5% to 7.0% This proposal would Gov. Gregoires Tax to 7.0%. The increase would (11/28/11) increase the state sales tax rate from 6.5%Break Recommendations expire on July 1, in Thousands) (Dollars2015.

FY2013 Estimate1 $494,100

Governor Gregoires Recommendations

RECOMMENDATION TO CITIZENS RECOMMENDATIONS TO THE LEGISLATURE

converted to cash. This proposal would allow the department to immediately convert into cash all securities received as unclaimed property. The cash would be deposited into FY2013 RECOMMENDATIONS TO THE LEGISLATURE original owners of the securities at any the General Fund and may be claimed by the Estimate1 Requiresresults in avote of the Legislature majority one-time increase in General Fund revenue. time. This Convert local governments that issue building permits to supplyupon receipt 2,600 Require securities reported as unclaimed property immediately subcontractor $50,6002 Currently, the Department of Revenue must hold most securities such as stocks and information to the Department of Revenue This proposal would require local bonds received as unclaimed property for that issue residential building permits to and governments (cities, towns and counties) at least three years before they may be sold converted to cash. Thisof final inspection the name, contractor registration convert request at the time proposal would allow the department to immediately numbers into cash all securities received as unclaimed property. The cash would be deposited and state business license numbers of any subcontractors performing work on the into the General Fund and will helpclaimed by the original owners of the securities at any project. This proposal may be the department combat an underground economy time. This results in a one-time are paying their taxes and fairly competing with other and ensure that subcontractors increase in General Fund revenue. 2,600 Require local businesses. governments that issue building permits to supply subcontractor informationtime to Department of Revenue This proposal Currently, businesses to the claim an excise tax refund to four years would require local 2,100 Reduce the governments (cities, towns and counties) that issue residential building permits to This can file refund claims for five years the current tax year plus the past four years. request at the time oftime to claim refunds byname, contractor registration numbers proposal would shorten final inspection the one year. and state the interest ratenumbers of any subcontractors2% to equalworkfederal short- 1,200 Increase business license on excise tax assessments by performing the on the project. This proposalCurrently,the department combat an tax assessments and refunds term rate plus 4% will help the interest rate for excise underground economy and ensure that subcontractors are paying their taxes and annually. The ratewithcalendar is 2% above the average federal short-term rate, adjusted fairly competing for other businesses.is 3%. This proposal would increase the interest rate on unpaid taxes an year 2011 2,100 Reduce the time to claim an excise tax refund to four years Currently, businesses additional 2%. can file refund claims taxpayers from renewing liquor licensestheThis proposal This 1,000 Prohibit delinquent for five years the current tax year plus past four years. proposal would shorten time to claim refundstaxes before their liquor license could be would require businesses to pay any past due by one year. Increase the interest rate on excise tax assessmentsbusiness to equal the federal short- 1,200 renewed. The requirement would be waived for any by 2% in a payment plan with the term rate plus 4% Currently, the interest rate for excise tax assessments and refunds department. is 2% above the average federal short-term rate, adjusted annually. The rate for calendar 900 Impose a $10 feeThis proposalissued to a taxpayerinterest rate on unpaid taxes due year 2011 is 3%. per invoice would increase the for unpaid taxes (balance an notices, assessments, warrants, etc.) This proposal would require a $10 fee for each additional 2%. 1 Estimates based on the taxpayers. 2012, billing invoice sent toNovember 2011 forecast unless otherwise noted. Assumes start date of July 1,1,000 for Prohibit delinquent taxpayers from renewing liquor licenses This proposal any new legislation. 700 Impose a $25 fee for the issuance and renewal of reseller permits This proposal 2 would require businesses to pay any past due taxes before their liquor license could be This is a one-time sale of accumulated securities. Actual value will vary depending on market value on date of sale. would require requirement would be waived for any business in permits. Resellerwith the a $25 fee for the issuance and renewal of reseller a payment plan permits renewed. The allow businesses to make purchases for resale without paying retail sales tax. Reseller 7 department. permits are now free.

Requires majority vote of the public Requires majority vote of the Legislature Increase securities reportedtemporarily from 6.5% immediately upon receipt Convert state sales tax rate as unclaimed property to 7.0% This proposal would $494,100 increase the state sales tax rate Revenue must 7.0%. The securitieswouldas stocks and $50,6002 Currently, the Department of from 6.5% to hold most increase such expire on July 1, received as unclaimed property for at least three years before they may be sold and bonds 2015.

FY2013 FY2013 Estimate1 Estimate1

TOTAL (REQUIRING MAJORITY VOTE OF THE LEGISLATURE)

1

$59,100

Estimates based on the November 2011 forecast unless otherwise noted. Assumes start date of July 1, 2012, for any new legislation. FY2013 2 This is a one-time sale of accumulated securities. Actual value will vary depending on market value onEstimate1sale. date of

RECOMMENDATIONS TO THE LEGISLATURE

Requires 2/3 vote of the Legislature 14 7 Increase business and occupation (B&O) tax rate on oil companies with windfall profits Currently, oil companies pay B&O tax in Washington at various rates

$131,000

TOTAL (REQUIRING MAJORITY VOTE OF THE LEGISLATURE)

$59,100 FY2013 Estimate1 $131,000

RECOMMENDATIONS TO THE LEGISLATURE

Requires 2/3 vote of the Legislature Increase business and occupation (B&O) tax rate on oil companies with windfall profits Currently, oil companies pay B&O tax in Washington at various rates 0.471% for retailing and 0.484% for wholesale and manufacturing. This proposal would impose an additional B&O tax of 0.6% of taxable income (for a total of 1.071% or 1.084%) if: a. The oil company reported, for federal income tax purposes, a profit (net income) of $1 billion or more in the prior calendar year; and b. The profit was 5% or more of its total revenue. Increase B&O tax rate on financial institutions with windfall profits Generally, financial institutions pay B&O tax at a 1.8% rate. This proposal imposes an additional 1.5% B&O tax rate (for a total of 3.3%) on financial institutions if: a. The financial institution reported a profit (net income) of $1 billion or more in the prior calendar year; and b. The profit was 5% or more of its total revenue. Repeal sales tax exemption for purchases made by nonresidents (from states with a sales tax of <3%) Currently, residents of any state, U. S. possession or province of Canada with a sales tax of less than 3% may purchase goods for use outside Washington without paying our sales tax. The proposal would repeal this sales tax exemption. Limit the B&O tax deduction for first mortgage interest to community banks (banks located in 10 or fewer states) Interest paid on first mortgages on homes and other residential properties are not subject to B&O tax. This proposal will require large national banks to pay the B&O tax on first mortgage interest income. The deduction will continue for locally owned and operated community banks. Impose 5% luxury tax on passenger motor vehicles - $50,000 threshold This proposal would create an additional sales and use tax of 5% on passenger motor vehicles if the price/value exceeds $50,000. Impose 1.5% gross receipts tax on gambling and lottery winnings This proposal would impose a new 1.5% excise tax on gambling and lottery winnings that must be reported for federal tax purposes. Washington residents would be allowed a credit for any taxes paid to another state on the same gambling winnings. 8 Increase the cigarette tax 25 cents from $3.025 to $3.275 This proposal increases the combined state cigarette tax by 25 cents from $3.025 to $3.275 per pack. Impose public utility taxes (PUT) on developmental disabilities supported living services at 5.029% This proposal would increase the tax rate for supported living and community residential providers to 5.029% of all income, including payments from government sources. This change enables the state to qualify for higher federal Medicaid reimbursement and would help offset reductions in payments to providers. Close B&O tax loophole that allows companies to create shell corporations outside the state to reduce their Washington tax liability Under current law, some in-state manufacturers have artificially reduced their B&O taxes by creating out-of-state shell corporations to qualify for the nonresident manufacturer exclusion. This proposal would end this practice. Limit B&O tax preferences for meat processors, fruit and vegetable processors The Washington Supreme Court expanded this preference for butchers to include products 15 that contained any amount of meat. This proposal restores the original legislative intent that the tax preference apply only to raw and perishable meat, not products such as canned chili. The proposal also applies to a similar preference for fruit and vegetable

53,800

23,400

18,100

14,200

13,100

12,400 11,600

3,500

900

manufacturers have artificially reduced their B&O taxes by creating out-of-state shell corporations to qualify for the nonresident manufacturer exclusion. This proposal would end this practice. Limit B&O tax preferences for meat processors, fruit and vegetable processors The 900 Washington Supreme Court expanded this preference for butchers to include products that contained any amount of meat. This proposal restores the original legislative intent that the tax preference apply only to raw and perishable meat, not products such as canned chili. The proposal also applies to a similar preference for fruit and vegetable processors. 114 Close B&O tax loophole that allows out-of-state printers to sell into Washington without paying B&O tax The department has been unable to collect B&O tax from out-of-state printers that sell into Washington. This proposal would end this loophole.

TOTAL (REQUIRING 2/3 VOTE OF LEGISLATURE)

$282,114

16