Ax It or Tax It: $241.8 million for an interstate commerce fuel tax break and an increase in the state estate tax

February 8, 2010 | Economic Opportunity Institute

Today’s suggested exemptions to ax and sins to tax:

$176 million | End the sales tax exemption on fuel and other items used in interstate commerce. Air, rail, and water transportation companies engaged in interstate or foreign commerce are exempt from sales tax on fuel and other items. The United States Supreme Court has ruled that states may tax such items, and 16+ states do exactly that – but not Washington. A review by Washington’s Joint Legislative Audit Review Committee in 2008 found no clear purpose for the exemption. Note that the estimated revenue shown here is for jet fuel, the largest component of this category, so actual revenues may by larger.

$65.8 million | Double estate tax rates starting in April 2010. Upheld by voters in a landmark 2006 ballot measure, Washington’s estate tax is both fair and progressive —  it exempts the first $2 million of property and farm property. Rates start at 10% and rise to 19% over $11 million. The federal estate tax expired on January 1, 2010.

Total value of this Ax It or Tax It package: $241.8 million.

Total value of all Ax It or Tax It packages to date: $1.05 billion. And change.

Economically speaking, Washington has been hit by a “perfect storm”: Plummeting tax receipts brought on by the national recession are now slamming our state’s rickety and outdated tax system. Last year, lawmakers cut $3.4 billion from the state budget. This year, we face a projected $2.6 billion shortfall.

“Ax It or Tax It” offers budget solutions that will both balance the state budget this year and provide long-term budget stability in the years ahead. By closing tax exemptions that no longer serve a compelling public purpose and carefully choosing new sources of revenue, lawmakers can stabilize funding for quality schools, affordable health care, a safety net for the most vulnerable, affordable housing, public safety, and a clean environment.

You can read previous editions of “Ax It or Tax It” here.

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Posted in State Economy, Tax and Budget

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