Gov. Chris Gregoire told Q-13 this week that closing corporate loopholes was not the answer to the $2 billion budget shortfall. (The latest recession-era revenue shortfall puts the state $1.4 billion shy of meeting its $32 billion budget and basically amounts to a $2 billion shortfall when you factor in the state's rainy day fund and reserves.) [pullquote]She's completely wrong when she says "no one can even identify $100 million" in savings.[/pullquote]

"Sounds great. Sounds wonderful," Gregoire said sarcastically about the lefty call to close tax breaks, adding, "Come do it. Come make it happen. ... I have tried it many times since being governor and have failed... No one can even identify $100 million, let alone $1 billion in savings by closing tax loopholes."

While Gregoire is right that agreeing on $2 billion in savings from tax breaks isn't likely (tax breaks total about $6.5 billion), she's completely wrong when she says "no one can even identify $100 million" in savings.

The main tax break that liberals have been clamoring to close for two years now is the B&O exemption for banks on interest earned over $100 million off first-time mortgage loans. This summer, the Joint Legislative Audit and Review Committee (JLARC), which is specifically tasked with evaluating tax breaks, put the bank loophole at $172.6 million in the 2011-113 biennium.



Moreover, the report stated: "There is no evidence that continuation of the tax preference will contribute to the implied public policy objective of making residential loans available to Washington home buyers at lower cost."

By inaccurately saying no one has identified a loophole worth $100 million—when, in fact, the poster child of loopholes regularly cited by her party is worth nearly twice that much—Gregoire does a disservice to the legitimate argument that closing loopholes should be in the budgeting equation.

Last week, in his response to the $1.4 billion problem, Democratic gubernatorial candidate US Rep. Jay Inslee (D-WA, 1) specifically called for an end to the bank loophole.