It’s hard to reduce tax breaks in Washington state, but lawmakers now have an easier path to scaling back one of them.
House Republican leaders threw their support Wednesday behind a plan to narrow a tax break for big banks, an idea they unanimously voted to defeat less than a year ago.
“We’ve looked into this,” said House GOP Leader Richard DeBolt. “It is not in the best interest of the state of Washington to pursue (the tax break) anymore.”
Republicans are in the minority, but Democrats need their votes because it takes a two-thirds supermajority to raise taxes.
House Republicans 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.
But the exemption for banks might be the most well-known of the hundreds of ways the state gives special tax treatment to businesses or groups. For years, opponents have criticized it as a giveaway to bankers.
Washington is the only state that doesn’t charge taxes on interest earned by banks on a home’s first mortgage, say its legislative champions.
But Washington raised other taxes that hit banks in 2010, and bank lobbyists have made a stand on preserving the business-and-occupation tax exemption, saying they have given enough.
Republicans now support keeping the mortgage exemption for smaller banks but ending it for five big, multistate institutions: Wells Fargo, Citi, KeyBank, J.P. Morgan Chase and Bank of America.
The change would raise about $18 million for the current state budget, helping a bit with a shortfall of more than $1 billion. But DeBolt said it should be done as part of government reform and not to save money.
Republicans locked arms last May against a similar proposal from Tacoma Rep. Laurie Jinkins and other freshman House Democrats.
Republicans argued at the time that the exemption helps home buyers.
Since then, DeBolt and Rep. Kevin Parker of Spokane say they have studied data showing big banks aren’t doing enough to pass along the savings. They said community banks do better.
Among the evidence Republicans say they have seen: 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 Washington’s Rob McKenna has shown the poor lending practices of big banks.
“I’m glad they’ve seen the light,” Jinkins said Wednesday.
Dave Fisher, a spokesman for the Washington Bankers Association, said the industry pays Washington about $350 million in taxes a year – and the amount is growing.
“Over the last couple years, the bank tax burden has basically doubled. We’re not aware of any other industry that’s faced that kind of increase,” Fisher said.
He couldn’t provide a before-and-after comparison of banks’ tax bills. But he said one of two major 2010 tax increases affecting banks is costing them an average of about $170 million a year.
Both the House and Senate are tentatively taking steps in the direction of targeting some tax breaks.
Senate leaders from both parties say they are trying to see if they can find agreement on any tax changes that would require two-thirds votes. Republicans’ budget writer, Sen. Joe Zarelli, is working on such tax proposals but declined to say if the bank exemption is one of those.
In 2010, senators couldn’t summon even a simple majority to limit the bank tax exemption. Now they need a supermajority.
A new state revenue forecast will be released today. For details, go to thenewstribune.com.