February 4, 1995 in City

Boeing Cuts Put Business Tax Plan On Hold But Key Element Of `Contract With Washington’ Still Necessary To Encourage Business, House Speaker Says

John White Associated Press

House Republicans’ plans to begin work on a major business tax measure were put on hold Friday in the wake of Boeing Co.’s announcement that it plans to eliminate 6,500 jobs in Washington this year.

The decision was House Speaker Clyde Ballard’s and he said the delay probably will be temporary.

“Most analysts say we will weather the storm but I want more information from our financial people,” the East Wenatchee Republican said in an interview. “I have a responsibility to look at that information.”

Ballard said, however, that, “I still believe we need these tax breaks to encourage business.”

He declined to predict when the House will take action on the measure. The bill is one of the key elements in the Republican’s “Contract With Washington.”

Earlier, Gov. Mike Lowry said he did not believe the job losses this year would cause a major dip in expected tax collections. And he said he’d pursue his plan to cut sales taxes for manufacturers as a way to stimulate economic growth.

That bill, which would carve $147 million out of state revenues, is still before the House Finance Committee, but is supported in principle by House Republicans.

Lowry predicted the state’s latest revenue forecast of $17.9 billion issued in November, “will not require a major adjustment” when a new forecast is issued in March.

He said chief revenue forecaster Chang Mook Sohn had factored in 3,000 Boeing job losses this year.

But Bret Bertolin, senior economic forecaster under Sohn, said Sohn forecast only 400 Boeing lost jobs this year. And Bertolin said “this is a negative, there will be an impact” on revenue from the cuts announced Thursday.

The measure, HB1023, put on hold Friday would cut the business and occupation tax for selected business services to 2 percent from 2.5 percent; other business services from 2 percent to 1.75 percent; and financial business services from 1.7 percent to 1.6 percent.

Revenue loss resulting from the reductions has been estimated at $180 million.

Also on the House calendar was HB1022 that would reduce the state’s share of the property tax by 5 percent, a reduction worth about $97 million over the next two years. It would amount to about $19 a year on a $100,000 house.

Although he supports the sales tax

exemption for manufacturing equipment, Lowry strongly opposes the other two Republican proposals, calling them “irresponsible.”

Lowry also has voiced strong opposition to any proposal to cut the state sales tax, a proposal by fellow Democrats.

The measure, HB1622, sponsored by Rep. Lisa Brown, D-Spokane, would cut the state sales tax rate from 6.5 percent to 6.3 percent and reduce state income by $277 million during the two-year fiscal period that begins next July 1.

Lowry maintains the savings to taxpayers would be minuscule. In a packet released to the Legislature recently, the he said such a cut would mean a savings of only $34 on a $17,000 automobile, $1 on a $500 television set and $1.40 on a $700 refrigerator.

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