Changes Proposed To Cut $1 Billion In Taxes

Republican gubernatorial candidate Dale Foreman wants to make three changes to state tax law, which he says would cut taxes by about $1 billion over the next two years.

Revenue projections show the state could handle the cuts with a little belt tightening - selective cuts of about 7 percent, Foreman said Wednesday in announcing the tax plan in Spokane.

But the state Revenue Department said the changes could actually cut $3.6 billion over the next two years, carving a much bigger hole than Foreman expects. That’s almost 19 percent of the state’s projected general fund.

Foreman said his plan would “give families and businesses much-needed tax relief.”

He wants to cut the state property tax by 20 percent, repeal what’s left of increases to the business and occupation tax enacted in 1993, and remove the sales tax on labor and materials for all construction and remodeling in the state.

He’d cut those sales taxes for homeowners doing their own remodeling jobs as well as for contractors on major construction projects.

Cutting the state’s share of the property tax would shrink tax coffers by $180 million over two years, Foreman estimated. The B&O reduction would be a cut of $132 million over that period, and the sales tax would allow builders to save between $500 million and $700 million, depending on the amount of construction in that period, he said.

But Revenue Department spokesman Mike Gowrylow said Foreman’s estimates may be off - way off, in the case of the property and sales tax changes.

The state collects about $1.1 billion per year in property taxes, Gowrylow said. A 20 percent cut would be $220 million per year, not $180 million over two years.

Department analysts believe the state’s share of the sales tax on labor and materials for all construction projects may be as high as $1.5 billion per year.

Later Wednesday, Foreman said there are no precise figures on the sales tax money generated by construction projects. His figures are preliminary, he said.

A special legislative committee began looking at the sales tax two years ago and proposed two changes that have since become law. But the analysis of the cost to cut the sales tax on labor and materials has not been completed.

“They certainly have a right to their opinion,” Foreman said of the Revenue Department figures. “In tax policy, there is no such thing as the exact right number.”

Changes in tax rates, in the economy and in building costs could all affect the amount of money saved, he said.

If he had to prioritize his tax cuts because of changes in the economy or revenue projections, Foreman said he’d go first for property tax relief, followed by the sales tax exemption, and then the B&O tax rollback.

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