In Our View: More Consolidation

Department of Revenue has a great idea: Merge collections of state and local B&O taxes

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Consolidation of government operations is the rage in Washington these days. May it continue into 2012, and a good example surfaced on Wednesday.

The last bill passed by the Legislature this year — Senate Bill 5931 — might be one of the best. It authorizes a massive consolidation of several state departments that deal with information and technology services, personnel, printing and other administrative functions. The mergers are expected to begin in a matter of weeks, soon enough for affected operations to move into the $225 million Enterprise Services building and Data Center just east of the Capitol.

Visionary legislators will see this as a trend and not a conclusive triumph. The good example we’ve got in mind was announced Wednesday by the state Department of Revenue, responding to Gov. Chris Gregoire’s 2010 executive order to find ways to simplify state and local tax systems.

After meeting with small businesses, local governments, tax experts and other stakeholders, the DOR recommends centralizing the collection of state and local business and occupation taxes. Currently, the DOR administers the state B&O while at least 39 cities (the DOR list shows none in Clark County) administer their local B&O taxes.

If legislators are wise, they will follow the recommendation to have the state perform both functions.

The precedent is clearly set with state and local sales taxes; the DOR collects both and distributes revenues back to the municipalities. Imagine how much easier it would be for the 39 cities to rid themselves of this function and benefit from a centralized B&O system. And that list includes many of the state’s biggest cities such as Seattle, Tacoma, Olympia, Bellevue and Everett. The cities with local B&O taxes that are closest to Clark County are Kelso and Longview.

This new convenience for cities is only one reason to merge the B&O tax programs. Perhaps a more important result would be the convenience for businesses, particularly small businesses that struggle with limited personnel to keep up with complex tax systems. Those businesses would have to file only one return instead of several, which often have differing definitions and requirements. The DOR wants to standardize those definitions and exemptions.

“By centralizing administration of tax reporting, Washington can relieve a significant burden for small-business owners, freeing them to get back to the work of running their businesses,” Suzan DelBene, DOR revenue director, said in a Wednesday news release from the DOR.

Real and quantifiable savings are not expected to be substantial, but that’s not a motivation for this recommendation; newfound convenience is what’s driving this notion. But even though the savings might not be quantifiable, we suspect any business owner would agree that, anytime you make his or her tax reporting easier, such efficiencies can quickly and easily benefit many other areas of the company’s operations.

All the more reason to get this consolidation on the agenda for the Legislature’s 2012 session.

Already this year, though, there’s ample reason to believe the consolidation of state departments could save up to an estimated $18 million biennially. The departments most affected with reduced functions will be General Administration, Information Services, Personnel and the State Printer.

We hope this becomes a pattern for many years to come.