Opinion editorial by Bruce Chandler: What are tax incentives and why are they important?
Special to the Yakima Valley Business Times
As I write this, the Legislature is considering the best way to balance the state operating budget, which will receive $2 billion more than the last budget. One of the issues key to the discussion is the use of tax incentives. What are tax incentives and why do they matter to Washington's citizens?
Tax incentives are also known as tax “breaks.” When the Legislature believes an industry offers such a large benefit in the way of jobs and economic growth, it seeks to encourage the industry to locate or expand in Washington state to benefit the economy. The largest tax incentive is actually on the food you purchase – most of what you buy in the grocery store is not charged sales tax. Another existing tax exemption allows people who want to trade in their current vehicle to subtract the sale of that trade-in from the price of the new car. So, if you purchase a $25,000 vehicle and trade in your current car that is worth $10,000, you would only pay sales tax on $15,000. This exemption was actually passed by a vote of the people several years ago in order to help boost the auto industry.
Governor Inslee suggests ending some of these incentives, including vehicle trade-ins, in his budget outline. He says this does not break his campaign promise to not increase taxes because, for him, ending tax incentives is not the same as increasing taxes. The thousands of businesses and consumers who would pay more to the government may feel differently. If a farmer buys a used combine for $100,000 at a farm auction, he currently pays no sales tax on the equipment. However, Gov. Inslee proposes that same farmer pay at least $7,900 in taxes in Yakima County on top of the purchase charge. Would this farmer feel his taxes have been increased? I would think so.
Instead of arguing over semantics, the better question is, what is that farmer getting for his $7,900 in hard-earned dollars? Does he receive more public services? Unfortunately, he receives no more value than before.
The governor says increasing taxes by $1.2 billion would go toward new education funding to comply with the state Supreme Court's ruling in McCleary vs. State. However, both House Republicans and the Senate Majority Coalition Caucus have proven the Legislature can comply with the court ruling and our constitutional obligation to fund education without increasing taxes.
As you read this, the Legislature is likely wrapping up the 2013 session, so it is difficult for me to predict the outcome. My goal is for the Legislature to adopt a fiscally responsible budget that is sustainable and predictable for its citizens. Arbitrarily ending tax incentives merely creates uncertainty for employers and consumers who are critical to our state's economic recovery now and into the future.
Rep. Bruce Chandler lives in Granger and represents the 15th Legislative District, which includes eastern Yakima County. He serves on the House Appropriations Committee as the assistant ranking Republican.