Amelia Earhart flew from California to Hawaii. The first canned beer was sold. Adolf Hitler started to re-arm Germany. And Washington state legislators enacted the Revenue Act. All this happened in 1935. While history has moved on, Washington’s tax code stood still. It still contains outdated breaks and exemptions that cost the public millions of dollars each year. The Joint Legislative Audit and Review Committee has studied many of these and recommended action. But over the years, bills to fix these dusty relics have failed. With Initiative 1053 unconstitutionally tying the hands of our elected officials by requiring a 2/3rd majority to end tax loopholes, Olympia isn’t providing solutions.
In this time of financial crisis, the Legislature must re-examine outdated, wasteful tax breaks that are hurting the middle class. If cuts to college tuition, health care for working families and medical assistance for our most vulnerable people are on the table, we should also take a hard look at tax laws written when FDR was president.
Year enacted: 1935What’s it about: Interstate transportation
What it does: Gives shipping companies a tax break if they move goods across the state line.
Number of businesses that take advantage of it: unknown
Cost to taxpayers: $27 million
What the legislative committee says: Because the U.S. Constitution no longer prohibits the instate portion of interstate transportation from being taxed, the public utility tax should be imposed on these activities.
Legislative inaction: No bill has been introduced to remove this exemption
Year enacted: 1935
What’s it about: Agricultural producers
What it does: Gives a business-and-occupation tax exemption to farmers regardless of income
Number of businesses that take advantage of it: 35,000
Cost to taxpayers: $29.6 million
What the legislative committee says: Given the fact that incomes have increased significantly for some farms since the period of financial hardships when this tax exemption was enacted, the Legislature should consider establishing an income threshold in order to qualify for the business and occupation tax exemption for agricultural producers.
Legislative inaction: One bill was introduced in 2010 to eliminate the B&O tax exemptions for agricultural producers, but it was not enacted.
Year enacted: 1935
What’s it about: Urban transportation and vessels
What it does: Taxes transportation-related businesses at different rates
Number of businesses that take advantage of it: 2,015
Cost to taxpayers: $6.2 million
What the legislative committee says: The Legislature should review the policy of taxing transportation related business activity at different public utility tax rates based on where a transportation service takes place or the size of a vessel in which the service is conducted.
Legislative inaction: Two bills were introduced in 2010. One would have eliminated the tax preference altogether. The other would have retained the urban transportation and vessels under 65 feet classification, but eliminated the preferential rate. Neither bill was enacted.
Year enacted: 1935
What’s it about: Membership dues and fees
What it does: Clubs able to deduct membership dues
Number of businesses that take advantage of it: 218
Cost to taxpayers: $2 million
What the legislative committee says: The Legislature should clarify which clubs should qualify and provide a simple method to value this deduction.
Legislative inaction: Three bills were introduced in 2010. Two limited the B&O tax exemption for membership dues and fees to only nonprofit organizations. The other eliminated the entire tax preference. None of the bills were enacted.
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