REUVEN CARLYLE: Want a tax break? Publicly share your “pay as you go” ideas.
“Pay as you go” is a budgeting principal that has been tried in Congress and in many states and failed in almost as many places. It’s popular on the left and right during good times but understandably struggles during difficult economic times. It was seen as important to balancing the budget in the 1990s under divided government, and the concept has had starts and stalls since, mostly when political pressure forces tough decisions “off budget.” The concept is simple: Force a legislator to formally identify a source of funding (revenue increase, spending decrease or combination thereof) for her or his new spending idea whether a tax expenditure or appropriated spending. The real reason for the failure, of course, is that publicly identifying a way to pay for a tax expenditure or spending increase is hard work and makes double the enemies one often needs to get a deal done quietly.
A strong case can be made that pay as you go makes the most sense at the state level where we don’t print money and must balance a budget each biennium.
Ultimately budget writers are forced to institute a pay as you go plan behind the scenes and in the back rooms of state government. We line up the list of spending proposals (good, bad and ugly) from the base level budget and our colleagues and juxtapose it against available or new revenues. And we try and make the two sides of the ledger match by moving the lego pieces around until a package balances financially and politically.
Four years ago I posted a blog entry about the importance of a “pay as you go” approach in the Legislature. As a back bencher the idea was naturally unceremoniously ignored. Now, as chair of the Finance Committee, I have slightly more institutional authority and credibility to implement elements of such a policy, and I intend to do just that because it brings actual sunlight into the budgeting process.
For tax incentives, exemptions and preferences that come before the committee in 2015, I intend to respectfully ask proponents to publicly make specific recommendations for how to fund their individual proposals. I do not mean this to put unnecessary or inappropriate pressure on guests or to make individuals uncomfortable, but I do intend to make it clear that each request for tax expenditures does require a source of financing. The pipeline of tax expenditures is not innoccuous from a fiscal perspective and it shouldn’t be assumed that it is simply a matter of priorities. Tax expenditures are appropriations just as much as appropriated budget items when they literally reduce revenues. That is not a value judgement but a fact of budgeting life.
Recently, Governor Inslee outlined his vision for extending the sales tax on electric vehicles. This is a legitimate public policy issue and warrants a thoughtful public discussion about the economic, environmental and transportation policy implications. While I strongly support the importance of migrating to a non-fossil fuel based transportation system, we do have a difficult position in our obligations to secure adequate funding for the 2015-2017 operating budget. The total fiscal cost over the coming four years of the plan stretches to $60 million in out-of-pocket costs. There was media coverage of the discussion of Inslee’s plan and my thoughts on the issue here and here.
The cost of tax expenditures has reached a tipping point of pressure especially in light of the Supreme Court’s ruling holding the Legislature in contempt for failing to amply fund public education. It’s critical that proponents from the Governor to legislative colleagues to lobbyists to CEOs appreciate the importance of the opportunity cost of a tax policy decision. I said of the Governor, “If he wants this tax break I respectfully invite him, like all others in Olympia, to propose a specific, off-setting revenue source or spending cuts to pay for it.” If it’s good enough for the Governor and budget writers behind the scenes, then it’s good enough for the public, by the public, in the public arena.
Your partner in service,
Reuven.