Open Government

WPC's Center for Government Reform's mission is to partner with stakeholders and citizens to work toward a government focused on its core functions while improving its transparency, accountability, performance, and effectiveness for taxpayers.

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How Much of a Hit Will Business Take from WA Legislature?

April 2, 2010 in In the News
The Biz Coach
The Biz Coach
Friday, April 2, 2010

Washington state Department of Revenue wants more clout over ‘avoiders’

April 2, 2010 in In the News
Puget Sound Business Journal
Puget Sound Business Journal
Friday, April 2, 2010

April 2, 2010 in Blog

With the special session running dangerously close to going the full 30-days, it appeared yesterday that a tax compromise between House and Senate Democrats was about to be announced. The basis for this belief was the apparent willingness of the Senate to drop its demand for a sales tax increase.

According to Sen. Murray, however, the sales tax increase is still very much in play.

Publicola has the scoop:

Despite word in Olympia that the Senate was looking for a way to ditch their plan to raise the sales tax in Washington, Senator Ed Murray (D-43, Sea!
ttle), the point man for the Senate in revenue negotiations, said nothing of the sort is happening.

Yes, the Senate is considering other tax increases in lieu of the sales tax increase, and in turn looking for ways to win votes in the House, but they’ve been doing that since the beginning, and that doesn’t mean the Senate favors a no-sales-tax-increase plan, said Murray.

Andrew Garber of the Seattle Times wrote this afternoon that Senator Lisa Brown (D-3, Spokane) was working on a way to drop a sales tax increase.

“Yeah, that’s not accurate,” said Sen. Murray. “I’m the revenue guy in the Senate. [The sales tax increase] is still in play. We still don’t have an agreement. As of 6 p.m. tonight, the sales tax is very much in play in various Senate [revenue] proposals.”

Having already had 79 days (regular and special session) to figure out a way to increase the tax burden on Washingtonians, perhaps it is time!
to bridge the budget gap with additional spending reductions.

UPDATE (1:06 p.m.)

Senate Majority Leader Lisa Brown reiterated this morning that she is working on an $800 million tax increase package - without a sales tax increase.

Here are the details from the Senate Democrats' blog:

Senate Majority Leader Lisa Brown talked to Andrew Garber of the Seattle Times recently and told him that, in the spirit of moving the revenue debate forward, she is working on a $800 million revenue proposal without a sales tax.

Brown said it remains to be seen whether there is support in the Senate for alternatives to the sales tax, but that she is having conversations within her caucus about the spectrum of options. Meanwhile, talks with the House continu!
e on how to raise the agreed-to amount of $800 million in new revenue. Read the article here.

"Small Business Taxpayer Bill of Rights" legislation introduced

April 1, 2010 in Blog

Though we're still mired in special session, today Reps. Campbell and McCune introduced HB 3217, the "Washington small business taxpayer bill of rights." Basically, the legislation aims at:

1) Provides relief from unintentional mistakes regarding state tax obligations;

2) Requires the Department of Revenue to provide information about a business's industry-specific tax obligations at the time of tax registration; and,

3) Requires DOR to adhere to any specific official written advice unless the department later modifies the advice in writing.

The legislation applies to small businesses registered as a sole proprietorship, a limited liability business in its first year of business if its assets amount to less than $500,000, or any small business with less than $500,000 in gross income in the prior calendar year.

Basically, the le!
gislation looks to waive penalties and interest on penalties for small or new businesses that incur these penalties and interest through unintentional actions. The bill also confers "rights" upon the qualified business that DOR must supply certain tax information to these businesses and must supply, in writing, explanation of any tax deficiency assessments, penalties, interest against the small business.

It's doubtful this legislation will go anywhere, and the definition of "not intentional" tax violations is pretty vague and will need further tweaking. But with our tax code becoming more and more complex each session, and now with Congress wreaking havoc on the federal tax code with health care reform, perhaps a little codification of taxpayers' rights is in order. 

Budget Deal in the Works?

April 1, 2010 in In the News
Washington Alliance for a Competitive Economy
Washington Alliance for a Competitive Economy
Thursday, April 1, 2010

Who bears the brunt of taxes in WA, businesses or people?

April 1, 2010 in Blog

A new report released this week from the Council on State Taxation, along with Ernst and Young, show the precarious balance between who bears the tax burden in Washington state, businesses or individuals. 

As policymakers continue to exhort the need for businesses to "pay their fair share" in taxes, it might be worth taking into consideration that business paying taxes to play fair is a bit of a misnomer. Businesses don't pay taxes. People do. As the COST report points out,

"...the legal liability of businesses are ultimately passed forward to individuals through higher prices or backward to labor (employees) and owners of capital through lower income. By analyzing the economic incidence of taxes, the product of the shifting taxes to consumers, labor and capital, it becomes clear that taxes levied on business are ultimately borne by consu!
mers, employees, and owners of capital. What, then, is the rationale for taxing businesses?"

That rationale, is the businesses need to pay for their fair share of government services (infrastructure, property right enforcement, regulatory and licensing, et. al.), whether the business benefits directly or indirectly. Ok, fair enough, there shouldn't be any freeloaders. But the report goes on to say that,

"If state and local business taxes were equal to the value of the benefits business received from state and local public services, they could be considered a payment for services and taxes would not influence business locations decisions or impact competitiveness. However, if state and local business taxes exceed the value of the benefits received from government services, the difference represents an excess cost to business that will reduce profitability in the absence of shifting the tax through higher prices or lower paym!
ents to labor. When such excess costs exist, they can affect a!
company's choice of locations."

As it turns out, in nearly every state the business tax burden exceeds the value of government services that directly benefit business, regardless of how you take into account the level of education spending.

What then, is Washington's ratio of state and local taxes on benefits versus spending benefiting businesses? On the high end (assuming no education spending directly benefits businesses) our ratio is 4.1:1 -- businesses are taxed 4.1 times as much as they receive in benefits from government spending. The national average is 3.5:1. Also, Washington is higher than Oregon (2.4:1) and Idaho (2.8:1).

Even when assuming, on the low end, that 50% of education spending directly benefits business, Washington is still above the national average at 1.4:1 -- the national average being 1.1:1. Again, businesses in Oregon (0.8:1) and Idaho (0.9:1) are both better off with this calculation.

There are lo!
ts more interesting factoids in this report, but one other interesting tidbit is the comparison of tax revenues between fiscal years 2005 and 2009. 

Even though 2009 was in the midst of the Great Recession for tax revenue, in Washington revenues were up 15.2% over 2005 levels in the amount collected from businesses and up 17.6% in the amount collected in total state and local taxes, which is pretty much along national trends. Yet, even with these increases, Washington and most other states are facing the reality of making drastic cuts in spending, raising taxes, or both.

Public records requesters no longer equal in Washington

April 1, 2010 in Blog

I wish this was an April Fools' joke but sadly it's true - Washingtonians are no longer equal under the law when it comes to accessing public records. Prior to yesterday, the state's public records act prohibited government officials from distinguishing between citizens seeking information. 

According to RCW 42.56.080:

Public records shall be available for inspection and copying, and agencies shall, upon request for identifiable public records, make them promptly available to any person including, if applicable, on a partial or installment basis as records that are part of a larger set of requested records are assembled or made ready for inspection or disclosure. Agencies shall not deny a request for identifiable public records solely on the basis that the request is overbroad. Agencies shall not distinguish among persons requesting records, and !
such persons shall not be required to provide information as to the purpose for the request except to establish whether inspection and copying would violate RCW 42.56.070(9) or other statute which exempts or prohibits disclosure of specific information or records to certain persons. Agency facilities shall be made available to any person for the copying of public records except when and to the extent that this would unreasonably disrupt the operations of the agency. Agencies shall honor requests received by mail for identifiable public records unless exempted by provisions of this chapter.

As a result of a law approved by all but one lawmaker (Sen. Oemig) and signed by Governor Gregoire yesterday, however, only representatives of the news media will be able to access certain information about law enforcement employees. 

Here is what the new law (HB 1!
317) says

Washington's $200 million question: taxes or more cuts?

March 31, 2010 in In the News
The Herald (Everett)
The Herald (Everett)
Wednesday, March 31, 2010

Washington's Tax Freedom Day is April 15 -- 5th worst in nation

March 30, 2010 in Blog

From a Tax Foundation release today:

"Each state has its own Tax Freedom Day. Because of modest incomes and low state and local tax burdens, Alaska and Louisiana celebrate Tax Freedom Day earliest on March 26, the 85th day of the year. Connecticut celebrates last on April 27, the 117th day of the year, because income per capita is higher than in any other state. High-income states pay much more in federal taxes, and they often have higher state-local taxes as well. Joining Connecticut in the latest celebrations are New Jersey (April 25), New York (April 23), Maryland (April 19) and Washington (April 15). Alaska and Louisiana are joined in early celebration by Mississippi (March 28), South Dakota (March 29) and West Virginia (March 30)"

pan style="font-family: Helvetica, Arial, sans-serif; line-height: 16px; font-size: 12px; ">This means workers in Washington need 105 days in order to pay off the government and begin earning for themselves. And as policymakers continue to hem and haw, not over if to raise taxes, but rather, how to raise taxes, expect next year's Tax Freedom Day to be later.