Testimony Sought for September 18, 2015 Meeting

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Each year the Citizen Commission for Performance Measurement of Tax Preferences schedules specific tax preferences for review and dedicates a meeting to public testimony on the results of those reviews. This year, the Commission asks that stakeholders:

  • Specifically answer six questions when testifying.
  • Provide more detailed information on a set of specific preferences.
  • Review and provide the Commission feedback on issues they are considering on how to conduct performance audits of tax preferences.

If you wish to submit written public testimony, click here.

Questions for Stakeholders to Address on Both In-Depth and Expedited Reviews

Commissioners request that stakeholders include responses to the following six questions when presenting written or oral testimony in support of, or in opposition to, a tax preference. Those testifying are asked to provide answers to the following questions, as well as any relevant evidence:

  1. Is there evidence that the tax preference achieved its purpose, as noted in the 2015 tax preferences reports?
  2. Does the preference provide benefits in addition to those stated in its intended or inferred purpose, consistent with one or more of the six public policy objectives stated in RCW 82.32.808(2)? These six purposes are that the preference is:
    1. Intended to induce certain designated behavior by taxpayers
    2. Intended to improve industry competitiveness
    3. Intended to create or retain jobs
    4. Intended to reduce structural inefficiencies in the tax structure
    5. Intended to provide tax relief for certain businesses or individuals
    6. A general purpose not identified above
  3. Is there a loss of tax revenue as a result of the preference; and if so, do any increased taxes from new economic activity exceed that loss?
  4. Specifically, in the case of property tax preferences, what would be the impacts on taxpayers and economic activity if the preference is eliminated or modified?
  5. Does this preference have negative consequences? For example, were other industries, workers, or the environment harmed by activities stimulated by this tax preference?
  6. How does the overall impact of the “preference” affect the tax burden in Washington compared with a similar tax burden in other states?

Linked are the 2015 Expedited Reviews and the 2015 in depth reviews.

Additional Questions for Stakeholders on Specific Expedited Preferences (requested by Chair Longbrake and Vice Chair Kahng)

  1. Agricultural Products (Property Tax) - RCW 84.36.470 (pg. 1)
    What would be the impact on taxpayers and economic activity if the preference were to be eliminated?
  2. Farming Machinery and Equipment (Property Tax) – RCW 84.36.630 (pg. 4)
    Why does this exemption apply only to the state portion of property tax and not the local portion?
  3. Livestock Nutrient Management Equipment (Sales and Use Tax) – RCWs 82.08.890; 82.12.890 (pg. 5)
    Seed Conditioning (B&O Tax) – RCW 82.04.120 (pg. 9)
    Conditioned Seed Wholesaling (B&O Tax) – RCW 82.04.331 (pg. 10) Horticultural Packing Materials (Sales and Use Tax) – RCWs 82.08.0311; 82.12.0311 (pg. 11)
    Anaerobic Digesters for Dairies (Sales and Use Tax) – RCWs 82.08.900; 82.12.900 (pg. 13)
  4. For each of the five preferences listed above please address:

    • What is the purpose for each preference?
    • Is there any evidence that the preference(s) has achieved its purpose, as noted in the 2015 Expedited Tax Preference Report?
    • Does the preference provide benefits in addition to those stated in its intended or inferred purpose consistent with one or more of the six public policy objectives stated in RCW 82.32.808(2)?
  5. Pollination Agents (Sales and Use Tax) – RCW 82.04.050(11) (pg. 18)
    Aluminum Production Anodes and Cathodes (Sales and Use Tax) – RCWs 82.08.02568; 82.12.02568 (pg. 22)
    • What is the purpose for each preference?
  6. Natural Gas Purchased by DSI Customers (Use Tax) – RCW 82.12.024 (pg. 35)
    Natural Gas Purchases by DSI Industry (B&O Tax) – RCW 82.04.447 (pg. 36)
    Electricity Purchase by DSI Industry (Public Utility Tax) – RCW 82.16.0495 (pg. 37)
    • Since they are not used, should these preferences be repealed?

 

The Citizen Commission also seeks testimony on its tax perference performance audits process.

In 2016, the Citizen Commission for the Performance Measurement of Tax Preferences will complete the final year of the initial ten-year tax preference review cycle. Looking ahead to the next ten-year tax preference review cycle, the Citizen Commission wishes to re-examine the scheduling process and review questions and determine whether there are changes that could improve the reviews.

To facilitate this re-examination, the Citizen Commission has identified a number of key issues to consider.

The Commission is soliciting public comment on the issues outlined below, as well as any other issues relevant to the tax preference review process. The public is invited to share their thoughts in-person or in-writing at the September 18, 2015, Citizen Commission meeting.

Key Issues:

  1. Are there factors with respect to previously reviewed preferences that should be considered in determining the review schedule?
    For example:
    1. Preferences previously reviewed by JLARC staff where there is no substantive change and with no subsequent legislative action.
    2. Preferences recommended to continue for administrative or structural reasons, such as avoiding double-taxation.
    3. Preferences recommended for continuation by both JLARC staff and the Commission.
    4. Preferences with no data to evaluate performance metrics, regardless of whether they are implied or stated.
    5. Preferences that are not being used.
  2. Should the Commission continue to group preferences, such as by industry sector or by similarity of purpose?
  3. Statute permits the Commission to determine that certain preferences are critical to the tax structure and to omit them from review. Are there preferences that the Commission should determine as critical to the tax structure, and thus not subject to review?
    Currently, statute exempts the following from review:
    1. Those required by constitutional law;
    2. The sales and use tax exemption for machinery and equipment for manufacturing, research and development, or testing;
    3. The small business credit for the B&O tax;
    4. Sales and use tax exemptions for food and prescription drugs;
    5. Property tax relief for retired persons; and,
    6. Property tax valuation based on current use.
  4. Should preferences receive greater priority in the schedule if they have an expiration date or if the Legislature specifically requests a JLARC review?
  5. Should preferences with new “performance statement” provisions receive greater priority in the schedule?
  6. Are there questions evaluated by the JLARC staff that should be de-emphasized? Are there questions that should be modified or added?
    Questions always addressed in reviews:
    1. What are the public policy objectives? Can we identify evidence about whether the objectives are being achieved?
    2. Who are the beneficiaries? Are there unintended ones?
    3. What are the beneficiary savings?
    4. If the preference were terminated, what would the negative impacts be on beneficiaries?

    Questions addresed as appropriate:

    1. What are the impacts of the distribution of the tax burden due to the preference?
    2. If the preference were terminated, what effect would the resulting higher taxes have on employment and the economy?
    3. For preferences with economic development objectives: what are the economic and employment impacts of the preference, and how do they compare to economic and employment impacts of reduced government sector spending? Do taxes associated with any increased economic activity stimulated by this tax preference exceed the preference’s loss of tax revenue?
    4. Do other states have similar tax preferences?
  1. Potential additional questions:
    1. Should there be more specific direction about evaluating impacts of the distribution of the tax burden due to a preference (e from above)? Currently this is only addressed for property taxes, and merely points out there is a structural shift in burden to remaining property owners.
    2. For preferences intended to accomplish choosing one tax approach over another (such as choosing either PUT or B&O), what are the fiscal impacts over time of the choices?
  2. Does the overall review effort merit additional JLARC staff resources?