American Legislative Exchange Council considers Washington’s new tax preference transparency law

August 13, 2013

This year we worked with Washington lawmakers on language that eventually was included in SB 5843: Strengthening the review of the legislature's goals for tax preferences. That proposal eventually became SB 5882 during the 2nd Special Session and was signed into law by Gov. Inslee after overwhelming approval by lawmakers. Among the bill’s provisions is a requirement for the legislature to identify explicit legislative intent and expected performance outcomes for tax preferences. With one of Washington Policy Center’s priorities being to help government officials improve the transparency and accountability of the legislative process and budget, we thought this would be a good idea to share with lawmakers across the country.

As a member of the American Legislative Exchange Council’s (ALEC) Tax and Fiscal Policy Task Force I sponsored a model bill based on SB 5843/5882 to help bring this reform to the attention of other states. For those familiar with the new Washington law, the intent section of the ALEC model bill I sponsored will look familiar:

The legislature finds that the state’s tax code includes tax expenditures enacted to achieve a variety of policy goals for the public interest. The ultimate goal should be for the state’s tax system to reflect sound principles of taxation. In order to make policy choices going forward regarding the best use of limited state resources, the legislature concludes that it is necessary to articulate the legislative intent and have measurable performance goals for each tax expenditure created.

Last week in Chicago the ALEC Tax and Fiscal Policy Task Force gave approval to my proposal and it now awaits the green-light from the full ALEC board in order to become an ALEC model bill.

This isn’t the first time ALEC members have taken note of the reforms pioneered in Washington State. ALEC’s State Budget Reform Toolkit pulls heavily from the many fiscal reforms Washington has enacted. Of course, Washington officials have also seen the wisdom of the exchange of best practices provided by ALEC as well:

As for tax preferences, the ultimate goal for lawmakers should be that a state’s tax system reflects sound principles of taxation based on the maxim “a fair field and no favors.” That is, lawmakers should pursue a fair tax code with a broad base, low tax rates and very few exceptions. However, if tax preferences are to be used, they should specify the legislature’s explicit intent and have measurable performance goals. Based on the approval of ALEC’s Tax and Fiscal Policy Task Force of the proposal modeled after Washington’s new law, lawmakers across the country appear up to the challenge.

Additional Information
Tax Neutrality Key to Pro-Growth Economy