Tax incentive evaluation ratings

Tax Incentive Evaluation Ratings: Washington

Rating: Leading

Key points:

  • Washington is leading other states because it has a well-designed plan to regularly evaluate tax incentives, experience producing quality evaluations that rigorously measure economic impact, and a process for informing policy choices.
  • The Joint Legislative Audit and Review Committee has long provided valuable insights on the history, purpose, and design of incentives.
  • After an evaluation showed two tax incentives designed to encourage research and development spending were producing few jobs relative to their cost, lawmakers allowed the programs to expire, saving tens of millions of dollars.

Washington evaluation law

Year enacted: 2006.a

Who evaluates: Joint Legislative Audit and Review Committee.

Length of review cycle: Ten years.

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Washington has one of the nation’s longest-standing and most successful tax incentive evaluation processes. These evaluations have helped lawmakers improve incentive policy.

For example, a 2012 evaluation showed that two tax incentives designed to encourage research and development spending were producing few jobs relative to their cost.b Based on that finding, a citizen commission that oversees Washington’s evaluations recommended that policymakers allow the programs to expire.c Lawmakers followed that advice, saving the state tens of millions of dollars.d

Under a 2006 law, the nonpartisan staff of Washington’s Joint Legislative Audit and Review Committee (JLARC) is responsible for evaluating tax preferences—including credits, exemptions, and deductions—on a 10-year cycle. The citizen commission guides this work by determining which tax preferences should be evaluated and when. JLARC’s evaluations include recommendations to continue, modify, or end each incentive, and then the commission also offers its own recommendations. To connect this work to the policymaking process, the Legislature’s fiscal committees hold a joint hearing on the evaluations.e

From the beginning, JLARC has provided valuable insights on the history, purpose, and design of incentives. In recent years, the evaluations have succeeded in rigorously measuring economic impact. For example, a 2016 evaluation of an incentive for data centers used economic modeling to compare the results of the incentive to an alternative scenario in which the state had used the money to increase government spending instead.Likewise, a 2015 film incentive evaluation showed what proportion of films would need to have located in Washington as a result of the incentive for the program to get better economic results than alternative strategies.g

In addition to changing specific incentives, Washington’s evaluation process has also helped reshape how the Legislature considers new tax preferences. As a result of 2013 legislation, any new tax preference must include a “performance statement.” Each statement documents the purpose of the tax incentive, how the state will know whether the program accomplished its goal, and what data evaluators will need to conduct the review.h In addition to helping JLARC produce high-quality analyses, the performance statements have also encouraged lawmakers and advocates for incentives to think carefully about the design of proposed preferences and what they are trying to achieve.i

JLARC has produced high-quality analysis despite the sizable task it has faced: The committee staff has studied more than 200 tax preferences over the last decade. In 2016, the commission exempted from evaluation dozens of tax preferences that lawmakers deemed were consistent with basic principles of tax policy, such as avoiding double taxation.j As a result, as it begins its second decade of evaluations, JLARC will be able to focus in even more depth on the state’s most important tax preferences.


  1. Washington Rev. Code Ann. § 43.136, http://app.leg.wa.gov/RCW/default.aspx?cite=43.136.
  2. Washington Joint Legislative Audit and Review Committee, “2012 Tax Preference Performance Reviews” (Feb. 20, 2013), A4-1–A4-20, http://leg.wa.gov/JLARC/AuditAndStudyReports/Documents/13-1.pdf.
  3. Washington Citizen Commission for Performance Measurement of Tax Preferences, “Meeting Minutes” (Oct. 9, 2012), http://www.citizentaxpref.wa.gov/documents/minutes/2012-10-09Final.pdf.
  4. Annie Zak, “State Budget Doesn’t Salvage R&D Tax Credits for Biotech, Tech,” Puget Sound Business Journal, July 2, 2015, http://www.bizjournals.com/seattle/blog/health-care-inc/2015/07/state-budget-doesnt-salvage-r-d-tax-credits-for.html.
  5. Washington Rev. Code Ann. § 43.136.065.
  6. Washington Joint Legislative Audit and Review Committee, “JLARC Final Report: 2016 Tax Preference Performance Reviews, Data Center Equipment” (January 2017), http://leg.wa.gov/jlarc/taxReports/2016/DataCenterEquipment/f/default.htm.
  7. Washington Joint Legislative Audit and Review Committee, “JLARC Final Report: 2015 Tax Preference Performance Reviews, Motion Picture Program Contributions” (January 2016), http://leg.wa.gov/jlarc/taxReports/2015/ MotionPictureProgramContributions/f/default.htm#Revenue.
  8. Washington S.B. 5882 (2013), http://app.leg.wa.gov/billsummary?BillNumber=5882&Year=2013.
  9. Keenan Konopaski (legislative auditor, Washington Joint Legislative Audit and Review Committee), interview with The Pew Charitable Trusts, Sept. 23, 2016.
  10. Washington Joint Legislative Audit and Review Committee, Issue Papers #1 and #3 (April 2016), http://www.citizentaxpref.wa.gov/documents/meetingmaterials/ April2016/JLARCStaffIssuePapers.pdf.
State tax incentives
State tax incentives

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Tax incentives—including credits, exemptions, and deductions—are one of the primary tools that states use to try to create jobs, attract new businesses, and strengthen their economies. Incentives are also major budget commitments, collectively costing states billions of dollars a year. Given this importance, policymakers across the country increasingly are demanding high-quality information on the results of tax incentives.