Spokane7
48°
April 1, 2010 in City
Lawmakers wrestling over final $200 million
Democrats in Senate favor sales tax bump; House, governor stick with package of other taxes
OLYMPIA – Much of this year’s legislative time has been devoted to a $2.8 billion hole in the state’s operating budget, but the special session is essentially locked up over less than 10 percent of that: about $200 million.
Democrats in the House and Senate are at loggerheads over who should pay that amount in taxes over the next 15 months: businesses, homebuyers and out-of-staters, or shoppers. Different parts of the state, particularly communities close to the border such as Spokane and Vancouver, and different segments of the economy will feel the tax bite harder, depending on which plan wins.
With no Republican in either house willing to vote for a tax increase, the Senate has a bare majority of Democratic votes for a plan that raises taxes overall by about $800 million, pulling in about a fourth of that from a temporary two-tenths of 1 percent increase in the state sales tax.
Senate Majority Leader Lisa Brown, D-Spokane, has consistently argued that’s the fairest way to spread the cost of state services, and while the sales tax falls hardest on the poor, the Senate proposal also offers a “working families” tax credit to soften the blow.
The House and Gov. Chris Gregoire generally agree with the Senate on how to raise about $600 million in taxes but oppose a sales tax increase. Gregoire hasn’t publicly threatened to veto a budget that includes a sales tax but has said repeatedly she considers it a “job killer.”
Instead, Gregoire proposed and the House approved a menu of taxes on banks, software designers, out-of-state shoppers and aircraft owners, designed to raise as much as the Senate’s sales tax increase.
Based on Office of Financial Management estimates, the priciest item on the menu would raise $76 million by applying sales tax to specialized or custom software designed for a particular user or business. Right now, someone buying a standard software package like Microsoft Office pays a sales tax, but those contracting for customized software do not.
“That’s significant, although it could depend on how you measure what’s custom and what’s not,” Cleat Grumbly of Spokane’s Next IT, where as much as half the revenue could be subject to the sales tax.
Most other states don’t tax customized software, Grumbly said. The proposed tax probably wouldn’t be enough to cause Next IT to relocate, but he wonders about small software companies in Eastern Washington that compete for regional business with companies in North Idaho and typically operate on small margins. Some could go out of business or lay off workers; others could move across the border.
The menu would collect another $51 million from banks that make large numbers of home loans. It levies the state’s business and occupation tax on revenue from first mortgages after the bank earns more than $120 million a year on those loans. Marty Brown, Gregoire’s legislative director and incoming head of the Office of Financial Management, said language is being negotiated in an effort to exempt all community banks in the state, so the new tax would hit large national banks doing business in Washington.
The $120 million threshold is set too low for a few of the bigger Washington-based banks such as Sterling Savings, said David Brukardt, executive vice president of Sterling Financial Corp., which did more than $160 million in first mortgages. But even if Sterling received a full exemption, the company wouldn’t be in favor of adding the tax to its bigger competitors, which would likely pass it on to borrowers, he said.
“All of us are willing to pay our fair share, but this is not the year to add costs to the fragile housing market,” Brukardt said.
Another entrée on the House tax menu would end the sales tax exemption some out-of-state shoppers get at Washington stores. Residents of Oregon, Montana and Alberta can avoid the sales tax by showing a driver’s license when they shop at Washington stores; ending that practice could raise $41.5 million.
The state Revenue Department doesn’t track sales tax exemptions recorded in individual counties or cities, but the benefit would likely be felt most in Vancouver and other communities near Oregon. But Spokane also sees significant tax-free sales at certain times of the year, John Shasky of NorthTown Mall said.
“I don’t think it would be a big deal,” said Harry Sladich of the Spokane Convention and Visitors Bureau, because most out-of-state shoppers are making the trip for other reasons, too. “But the poor retail clerk is going to get hammered the first time (the shopper) is told.”
Under negotiation is a plan to turn the exemption into a rebate so that the shopper would pay the tax with the sale and apply for a refund after returning home. The state would wind up keeping some money, likely from smaller purchases that aren’t thought worth the trouble of filling out a form. But for a big ticket item, they’d probably file, Marty Brown said.
The governor’s proposal also calls for higher fees or taxes on private planes and business jets. It’s a ramped down version of an earlier House plan but still tries to raise $4 million through what Todd Woodard of the Spokane Airport Authority called a “very real threat” to airports on border communities.
“Aircraft are a very movable asset,” he said, and pilots at Spokane International or Felts Field could relocate to Coeur d’Alene or Sandpoint if the fees went up dramatically.
Romney/Paul split weighing on county GOP 
Shazamm on April 01 at 6:35 a.m.
Couldn’t we save $200M by shutting down the Legislature? Also, how about a $100 surcharge on studded tires? I am really, really, really, sick of paying for all the damaged roads caused by studded tires, not to mention the hassle of dodging road construction all summer.
liarsinnews on April 01 at 7:37 a.m.
Since when has Lisa Brown given two hoots in heck for the poor? Brown has a appetite to starve the underprivileged for years and it seems to me she continues her reckless spending habits along with her so called governor.
peteroundy on April 01 at 8:52 a.m.
Who starves the poor? Governors don’t starve the poor! They may choose to provide less assistance due to budget deficits due to ineffective bloated social programs. But they do not starve the poor. Washington state provides more assistance to families in need via food stamps, housing and job training than most states in the union. We have a food banks, countless church food drives and lots of lakes full of healthy fish to eat. Generational government reliance starves poor people. You can give a man a fish and feed him for a day, or you can teach him to fish and feed him for a life time.
Ninch on April 01 at 9:48 a.m.
The article states: (T)he Senate has a bare majority of Democratic votes for a plan that raises taxes overall by about $800 million, pulling in about a fourth of that from a temporary two-tenths of 1 percent increase in the state sales tax….Senate Majority Leader Lisa Brown, D-Spokane, has consistently argued that’s the fairest way to spread the cost of state services, and while the sales tax falls hardest on the poor, the Senate proposal also offers a “working families” tax credit to soften the blow.
So only “working families” would get a tax credit???? That does not help the “poor” at all who are mostly poor because they cannot work or cannot find work.
BTW: peteroundy please explain how poor people can afford to fish these days. The basic fishing license is $24 plus they need basic gear, transportation, and sometimes must pay an additional fee for parking/access. Note also that there are limits on how many fish one is allowed to catch and possess.
peteroundy on April 01 at 10:55 a.m.
I was making a point that people need to become more self sufficient and not rely on the government so darn much. Can you imagine someone on the oregon trail asking for a free handout. with a little wood sign “help need food and shelter” had those people existed we would have never settled the west or beat the germans or landed on the moon.Those people would have died there on the side of the road. Now days your rewarded for holding up that little wood sign. What has happened to our society?
misjustice on April 01 at 12:13 p.m.
While I agree with general maxim re; “teach a person to fish…”
There are some cautions about those fish and the waterways that they are caught in that need to be highlighted:
” According to the Washington State Department of Health, to reduce exposure to PCBs, (1) eat no fish from the Idaho border to Upriver Dam; (2) limit consumption to one meal per month of all fish caught between Upriver and Nine Mile Dams except largescale sucker, which should not be eaten; and (3) eat two meals per week of rainbow trout and yellow perch, one meal per week of mountain whitefish, two meals per month of largemouth and smallmouth bass, and one meal per month of brown trout and largescale sucker caught between Nine Mile Dam and Long Lake Dam. PCBs accumulate in the skin, fat, organs, bones, and juices of fish. If you must eat the fish, remove and/or avoid eating these parts. To reduce exposure to heavy metals in beach soils (found primarily between Plantes Ferry Park and State Line), avoid muddy soil that can cling to shoes or clothing, avoid breathing dust, and wash your hands and face, especially before eating.”
http://www.landscouncil.org/water/river/_toxics.asp
MrNatural on April 01 at 1:00 p.m.
#&*$ the Doomed - R. M. Nixon
good post misjustice…I might add that not just PCB’s but PBDE’s and other PBT’s which are the result of the TToC’s…
…now where is my old fashion marmot stew recipe?…
As for balancing the budget…we all have an opinion on who’s back this burden should be on, but say for a moment we decided that a little goodwill along with civic sacrifice was the best way…
misjustice on April 01 at 2:11 p.m.
Thanks, Mr. Natural!
When the pols finally finish arguing and actually produce a final budget, the sacrifice, no doubt, will be spread across enough socioeconomic groups and disect/intersect enough interests that no will be happy! ; )
That said, despite many sentiments to the contrary, this is a we society and money is required to run the institutions that are required for a “civil society.” I do not mind paying my fair share nor do I mind paying a little more to ensure that we can continue to enjoy the benefits of modernity. As for “those people”, which are frequently cited as a reason for selfishness, I do not find it acceptable that “they” be left to starve, for want of a “fish” along the Oregon Trail of life….
Now, let’s all dance the Futterwacken!
misjustice on April 01 at 2:32 p.m.
Another aside regarding “those people,” I’m certainly glad that the Native Americans did not subscribe to that sentiment; had they, there, doubtless, would not have been an Oregon Trail as the early settlers would have been left to starve because they could not provide for themselves.
MrNatural on April 01 at 2:40 p.m.
You’re Welcome mj
….and the founding folks had to be “sociable” to survive and abhorred tyranny
“Better that ten guilty persons escape than that one innocent suffer,” — English jurist William Blackstone.
Oh and whilst dancing the Futterwacken you can recite:
“The time has come,’ the Walrus said,
“To talk of many things:
Of shoes — and ships — and sealing wax —
Of cabbages — and kings —
And why the sea is boiling hot —
And whether pigs have wings.’