Capital Views: Tax breaks get closer scrutiny in tight budget

Monday, February 17, 2003

DON JENKINS, Columbian staff writer

OLYMPIA, WA-- Clark County's semiconductor makers want a tax relief trifecta not given to other manufacturers.

Proponents of the tax breaks say that without the incentives the highly mobile industry, which has to retool every five or six years anyway, will leave for more lucrative homes in China, Eastern Europe or other states.

"It's always how much money you can make here, versus there," said John Marck, president of the 185-employee Sharp Microelectronics of the Americas in Camas.

"If the area doesn't give you the exemptions to stay competitive, you almost have to look elsewhere. It's a survival instinct."

House and Senate committees will hold hearings this week on identical bills, introduced by Clark County legislators, asking for exemptions in their property, sales and use, and business and occupation taxes.

But one person's "exemption" is another person's "loophole."

Also this week, a House committee will hear a bill sponsored by a Seattle Democrat, Rep. Jim McIntire, calling for a "performance audit" of the more than 400 tax exemptions already in place.

Evaluating the performance of agencies is a popular idea this session to make government "efficient and accountable," in the words of more than one legislator.

McIntire, a professional economist, advocates doing the same with what some in his field call "tax expenditures," a reminder that tax breaks represent a loss in public funds or a shift in tax burden.

In its most recent comprehensive report on tax breaks, the Department of Revenue found that 431 exemptions saved Washington taxpayers $45.9 billion in state and local taxes during the 1999-01 biennium.

The portion of that saved in state taxes, $27.2 billion, exceeded by 28 percent the revenue the state collected.

Another economist, Senate Majority Leader Lisa Brown, a Spokane Democrat and Gonzaga University professor, also advocates reviewing tax exemptions, especially since Gov. Gary Locke has proposed balancing the budget entirely by spending cuts.

"We simply think a balanced approach is to look on both sides of the equation."

Locke said last week that he wouldn't be opposed to ending some of the tax exemptions, if a review showed they didn't favor Washington companies or were out of date.

Cautioned House Minority Leader Rep. Cathy McMorris, R-Colville: "If you start eliminating these exemptions, you're talking about tax increases in the industries we want to thrive in this state."

Semiconductor tax incentives, HB 1751, sponsored by Rep. Bill Fromhold, D-Vancouver, will be be heard 1:30 p.m. Tuesday, O'Brien Building, Hearing Room E, by the Trade and Economic Development Committee. The Senate Economic Development Committee will take testimony on SB 5725, introduced by Sen. Joe Zarelli, R-Ridgefield, at 8:30 a.m. Friday in the Cherberg Building, Hearing Room 3.

Reviewing tax breaks, HB 1869, 1:30 p.m. Friday, O'Brien Building, Hearing Room C. Mandates looking at whether a tax preference still serves the public interest. House Finance.

Tuition for 'career students,' SB 5135, 3:30 p.m. Monday, Cherberg Building, Hearing Room 4: Introduced by Sen. Don Carlson, R-Hazel Dell, mandates higher tuition for longtime college students. Measure passed the Higher Education Committee and now will be examined by budget writers. Senate Ways and Means.

Initiative writing, HJR 4208, 8 a.m. Thursday, O'Brien Building, Hearing Room D: Introduced by Rep. Jim Moeller, D-Vancouver, asks voters to amend the state constitution to make initiative writers pinpoint budget cuts or name tax increases. House State Government.