House Republicans plan to release their budget proposal Friday, and today they gave reporters a preview of one step they would take to help bridge a small part of the shortfall: narrowing a tax break for banks.
The idea, a favorite of Democrats, would save the state budget $18 million and require two-thirds super-majorities in the House and Senate.
Republicans last year voted unanimously against a similar proposal from Tacoma Rep. Laurie Jinkins and other House freshmen that aimed at keeping school class sizes low and making a statement about the need to close tax loopholes. But they say since then they have studied data showing big banks aren’t doing enough to help homeowners with the money they save in business-and-occupation taxes.
“We’ve looked into this, we’ve talked to our constituencies about it, we understand more about the role that that plays,” said House Minority Leader Richard DeBolt. “It is not in the best interest of the state of Washington to pursue this any more.”
Among the evidence Republicans say they have looked at: a study by legislative auditors saying it’s unclear if the 1970 tax break is fulfilling its goal after decades of changes in the lending industry. The GOP also says the $25 billion settlement negotiated by state attorneys general including Rob McKenna has shown the poor lending practices of big banks.
Smaller, community banks do a better job passing savings to consumers, DeBolt said. So their proposal, like the one by Jinkins and a suggesting in Gov. Chris Gregoire‘s budget, would target big multistate banks. Republicans said five big banks would be affected: Wells Fargo, Citi, KeyBank, J.P. Morgan Chase and Bank of America.
Rep. Kevin Parker of Spokane is working on the proposal with a Democrat, Rep. Reuven Carlyle, and Republicans say they have met with Democratic Speaker Frank Chopp about it. They are also looking at other tax exemptions they say could be ripe for closure, such as breaks for wind turbines and other alternative energy sources.
They say the bank proposal would save about $20 million a year in future years. DeBolt said the goal is government reform, not increasing state revenue.
Prospects are uncertain in the Senate. Senate Republicans haven’t been involved in the discussions, and a two-thirds vote is needed because of voter-imposed tax handcuffs. Senators couldn’t even summon a simple majority in 2010 against the bank tax exemption.