So Washington is facing a $6 billion budget shortfall, give or take. The state is looking at slashing funding for core services like public schools, higher education, and even public safety. The governor is calling the situation “truly ugly.” Things are really pretty dire.
It seems like this would be a good time to close tax loopholes, especially when the loopholes are antiquated and preverse. So here’s one: despite the fact that Washington levies a sales tax on pretty much everything, the state has a special tax-exemption loophole for pesticides and fertilizers. We’re talking about roughly 2 billion pounds of fertilizers and maybe 37 million tons of pesticides that, for some reason, we don’t tax. If we applied the same tax rate that we use for clothing and computers, toys and tacos, we’d be looking at $100 million over the budget cycle.
$100 million won’t solve all our budget woes but that’s a decent chunk of change for teachers, cops, and college tuition. Why on earth should we keep this loophole?
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In fact, the toxic tax exemption is partly a result of historical accident. The state legislature carved out the exemption in 1943 “to assist an economically distressed industry.” One can only assume that agriculture lobbyists have given the loophole its staying power. And this really is about the agriculture industry. Ordinary schmoes like you and me have to pay sales taxes for fertilizers and pesticides; it’s only farmers that get the exemption.
It’s not like this is the only loophole for big ag. The state’s Department of Revenue has identified 42 different tax exemptions—worth more than $600 million per budget cycle—provided to farmers. These are effectively taxpayer subsidies for agriculture. Not that all of these subsidies should disappear—some of them may be smart—but still, closing the pesticide and fertilizer sales tax loophole is fairly small potatoes in the big scheme of things.
These tax exempt pesticides are the very same products that degrade water quality, kill and poison wildlife, and even hurt human health. Some of the fertilizers are also major contributors to global warming. What’s more, the loophole has the effect of disadvantaging organic and natural agriculture. If pesticide users had to pay the appropriate tax rate, it would make organic food a bit more cost-competitive, a healthy boon for consumers.
The state’s proposed budget cuts are bad business. In the bulls eye of the cuts we’ve got social services and public health, school-aged kids and towns struggling for economic development. We’re talking about slashing core pillars that underpin Washington’s civic environment. It would be something more than lousy policy to make those cuts without first closing this toxic tax loophole—it would be shameful.
Credit where it’s due: Yoram Bauman, a longtime friend of Sightline. I didn’t do a lick of research for this post, I just copped everything from the informative website that Yoram created to test a ballot initiative a few years back. See, especially, the FAQs. (Of course, any errors are my responsibility.)