Tax cut shovel will only dig a deeper hole

January 28, 2009 | Aaron Keating

If you’re holding a hammer, so the saying goes, everything looks like a nail. But what if you’re holding a shovel?

Faced with a mounting revenue shortfall, Washington lawmakers are grappling with potential cuts in health care, transportation spending, education and more. That hasn’t stopped some legislators from introducing bills to cut revenue even further.

House Bills 1027, 1304, 1411, 1442 and Senate Bills 5000, 5003, 5198, 5206, 5442 all propose more tax cuts that would further cut revenue for the very state services and programs that Washington residents need most in an economic crisis.

Already,  thanks to nearly 600 special tax breaks exemptions passed over the last five years, Washington State is passing up some $900 million in tax revenue. City and county governments are missing out on another $35 million.

This piecemeal approach doesn’t fix problems with the state’s tax structure. Nor does it promote economic growth that benefits all residents of Washington. It exacerbates inequity and shrinks the tax base while draining money from public services necessary for broad-based growth and creating a climate conducive to economic innovation.

Nobel-prize winner Paul Krugman, in a open letter to President Obama, reminded him that “Tax cuts are not the tool of choice for fighting an economic slump… [Because] they deliver less bang for the buck than infrastructure spending.”

Business and economic development tax breaks should be rare, temporary, and have clear performance measures attached so it’s easy to tell whether they’re really working as intended.

And in times of budget shortfalls, tax breaks should be evaluated against other priorities. If education, health care and criminal justice programs are on the table for possible elimination, special tax preferences should get the same treatment.

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Posted in State Economy, Tax and Budget

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