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Senate OKs sales, business tax hikes

Sat., March 20, 2010

House is expected to substitute its version

OLYMPIA – The Senate passed increases in state sales and business taxes Friday afternoon, sending a slightly pared-down version of its original tax package to the House, which had rejected it earlier this month.

Democrats in the House, as well as Gov. Chris Gregoire, remain opposed to a sales tax increase, but passing the budget in one chamber is a needed step in negotiations to fix a $2.8 billion budget shortfall and end the special session.

The House is expected to strip the text from the Senate budget bill and substitute its own tax plan, possibly by working past midnight Friday. At press time, however, the tax plan remained in the House.

The Senate debate was reminiscent of the session 12 days earlier, with Democrats arguing this was a balanced approach to the projected shortfall, which also includes spending cuts, federal funds and use of other accounts. They passed out a bar graph that showed more than $5 billion being cut from the state’s two-year operating budget, compared to $800 million coming from tax increases.

“We have more people in our state, more kids in schools, more seniors in nursing homes, more people in prisons,” said Majority Leader Lisa Brown, D-Spokane. The sales tax increase will cost service businesses a bit more and the average family about $20 a year, she said, but many people would be willing to pay that to keep class sizes down or help people in nursing homes.

But Republicans argued the cuts are really just reductions in projected increases that were approved in previous years when the economy was good. Rep. Mark Schoesler, R-Ritzville, said the changes in the tax plan made it a bit better, “but we pick a few winners and we pick a lot of losers in other categories.”

The bill passed by the Senate would:

•Raise for three years the sales tax by two-tenths of 1 percent, or 2 cents on a $10 purchase; the original bill called for a three-tenths of 1 percent increase.

•Raise the business and occupation tax on certain service providers for three years; amendments were passed to exempt scientific research, in an effort to spur high-tech businesses, and real estate agents because of the slump in the housing market. It permanently doubles the B&O credit.

Sen. Joe Zarelli, R-Ridgeview, questioned the fairness of sparing a few industries but increasing taxes for others: “All these industries we know are going to be hurt … because they didn’t have a representative on this floor today.”

•Extend for three years the sales tax starting May 1 to bottled water, which currently is classified as a food and not taxed. The original bill started the tax on June 1.

•Permanently extend certain business taxes to out-of-state companies that do business in Washington.

•Permanently close some tax exemptions or “loopholes” granted to businesses or industries.

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