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“Sunset” provisions (or expiration dates) recently played a big role in allowing Washington State lawmakers to eliminate special tax breaks for filmmakers, computer server farms, and newspapers. Unfortunately, a tax break for out-of-state banks was spared from the chopping block, due in no small part to its lack of a sunset provision.
Washington does a much better job than most states in making information available about the plethora of special breaks contained within its tax code. Oddly, however, Washington also makes it much more difficult than most states to modify or repeal any of those breaks, since it requires supermajority support in the state legislature in order to raise tax rates or repeal tax breaks.
The unfortunate effects of this supermajority requirement were recently on full display in the Washington State House of Representatives. Last week, a minority of lawmakers was able to block the repeal of a tax break for out-of-state banks, while education and health care were slashed in order to balance the state’s budget.
The Washington Budget and Policy Center (WBPC) points out that this problem could have been eliminated going forward had voters been allowed to decide this November on a proposal that would have given a simple majority of legislators the ability to repeal narrow tax breaks.
But in Washington and other states, a different method of addressing the unwarranted bias in favor of tax breaks is continuing to garner significant attention. Specifically, Washington was able to get three narrow tax breaks off its books — for filmmakers, computer server farms, and newspapers — by simply allowing them to sunset (or expire) as scheduled.
In Washington’s case, the value of sunsets is particularly pronounced, since tax breaks would otherwise continue to be in effect even after a majority of lawmakers decided they were ineffective.
Even in states without such supermajority rules, sunsets can be incredibly useful in forcing action. They require lawmakers to explicitly debate and vote, every few years or so, on tax breaks that otherwise would remain safely tucked away deep in the state’s tax code.
But sunset provisions are not the norm in Washington. According to a recent WBPC analysis, only 37 of Washington’s 301 tax breaks include an expiration date. That’s why Senator Jeanne Kohl-Welles has proposed legislation that would sunset all tax breaks in the state. The proposal is similar to requirements that already exist in Nevada and Oregon, and to a bill that ITEP recently testified on in Rhode Island.
Using more effective sunset provisions in Washington, and elsewhere around the country, would provide lawmakers with an extremely valuable tool for slowing the proliferation of tax breaks that are too often ineffective, unfair, or both.