Photo by Andrew Back, cc.

Photo by Andrew Back, cc.

Editor’s note: Later posts in this series revise the loophole’s size to $59 million, according to newly available 2014 data from the WA OFM. The $41 million noted below is based on earlier calculations.

Governor Inslee’s budget, released just minutes ago, tightens or closes several tax loopholes.

At least two of them are stellar public policy choices that will help tilt the state’s economy away from pollution and toward a cleaner and more equitable future.

  • His budget restores the extracted fuel tax use exemption to its intended scope, focusing on hog-fuel manufacturers rather than on the oil industry that by sheer historical accident came to dominate 98 percent of the exemption’s value. Fixing this tax preference will redirect more than $41 million per biennium from oil companies to the public’s coffers. (Sightline has written extensively about this loophole here and here.)
  • His budget also tightens the perverse trade-in loophole, an archaic and confusing giveaway that benefits car dealerships and high-income consumers. Tightening this loophole will claw back roughly $100 million per biennium for the public’s benefit. (Sightline has written extensively about this loophole here and here.)

Tax policy often sounds obscure, but it matters. The two loopholes I’ve mentioned here amount to big distorting giveaways that have simultaneously hurt the state’s economy and subsidized pollution and purchasing expensive cars.

That Governor Inslee is willing to take on the entrenched interests who back these giveaways—oil refiners and car dealerships—is a triumph of good policy over bad politics.

March 28, 2013