Close outdated tax exemptions for banks to protect core state services

I'M glad the banking industry recognizes that the state needs to raise revenue as part of balancing this year's budget ["State bank taxes would backfire on Washington's economy," Guest columnist, March 28].

Given this recognition, it is curious, but hardly surprising, that the industry then goes on to argue for continued preferential tax treatment, even while our basic public services face severe cuts or outright elimination. After an all-cuts budget in 2009 trimmed $3.5 billion from core services, Washington state is now facing an added budget shortfall of $2.8 billion. Let's remember what is at stake.

In 2010, this is the choice facing lawmakers: Should we further slash education, health care, help for families in need and environmental protections, or should we save some of these services and programs by closing an unjustifiable tax giveaway to out-of-state banks that costs state taxpayers more than $50 million per year?

The banking industry asserts that closing this loophole will hurt small community banks. But the revenue proposal would essentially exempt local and community banks by exempting the first $120 million in mortgage-interest income. In fact, the proposal may assist small banks in competing with the big banks that currently dominate the market. Most, if not all, of the more than $50 million generated by ending this tax break will come from large national banks headquartered outside of Washington state.

Additionally, the banking industry argues that creating a new tax on first mortgages means these loans will become both harder to get and more expensive. Where is the evidence for this claim?

The reality is the first-mortgage deduction has not been rigorously tested to ensure that it furthers any public purpose. Moreover, it seems disingenuous that banks would claim that closing this loophole will increase the costs of mortgages when the top five executives of Chase alone received more in bonuses last year than the state would earn from closing this $50 million loophole.

While there is no evidence of a connection between the first-mortgage deduction and a stronger economy, there is ample evidence that a connection exists between having an educated, well-trained work force and economic recovery. There is a connection between funding environmental protection, child care and other core services, and ensuring that Washington remains a place where employers will want to do business.

When big banks got into trouble because of their risky financial practices, taxpayers bailed them out. Now many of these taxpayers are depending on core state services in the midst of the most severe economic crisis since the Great Depression.

With the state budget in crisis and working families across Washington state in need of help, now is the time to close outdated tax exemptions that do not provide a value to taxpayers. This exemption, which almost entirely benefits the huge out-of-state banks whose reckless financial practices sent the nation into an economic tailspin, should be at the top of that list.