Washington lawmakers face taxing dilemma
OLYMPIA – The Legislature looked at raising a wide array of taxes Friday. Taxes on beer, on gasoline and on bottled water. On doctors and lawyers, on janitors and on nonresidents who come to Washington to shop.
Some people told legislators it was the right thing to do, either to help schools or protect jobs. Others told them it was the wrong thing to do, because it will hurt businesses and destroy jobs.
Legislators didn’t vote Friday on any of the proposals to repeal certain tax exemptions, end some discounted tax rates, extend selected surcharges or make temporary taxes permanent. Their fate hinges on upcoming budget negotiations between the House, where the tax increase bills now reside, and the Senate, where a coalition that controls the chamber has vowed not to raise taxes.
But the two chambers must resolve budget conflicts in a way that gets the approval of Gov. Jay Inslee, who also wants more state revenue, before they can leave Olympia for the year.
Before those negotiations begin in earnest, the House Finance Committee gave residents a chance to comment Friday morning on some $1.3 billion in business tax changes that would help pay for general state expenses like schools, colleges and social services. The House Transportation Committee held an afternoon hearing on an $8.4 billion package for bridges, roads, ferries, buses and bike paths that relies on a 10-cent increase in gasoline taxes, phased in over 10 years, as well as a variety of vehicle taxes and fees.
Businesses hammered the loss of various tax preferences or loopholes in the Finance Committee proposal. Typical were the challenges from owners of microbreweries, who face what they consider a new tax, although House Democrats describe it as ending a tax break they got when big breweries got a tax increase in 2010.
Either way, it could stifle the growing “craft” brewing industry in Washington, brewers told the committee before staging a protest on the Capitol steps. Those working on close margins might not be able to pass the tax along to customers, and have to lay off employees in order to pay it. If they can pass it on, they might lose customers.
The tax amounts to 14 cents on a six-pack, said Finance Committee Chairman Reuven Carlyle, D-Seattle. Maybe so, but by the time it reaches the consumer it could raise prices as much as $1, Melissa Ogrodowski of Red Hook Brewery replied.
There are about 200 microbreweries in Washington, said Mike Hale, who started Hale’s Ales in Colville in 1983. Hale’s is now located in Seattle, where it produces 10,000 barrels a year and has 45 employees. That tax would cost the company about $70,000 a year, which is the cost of one employee, said Hale, who joined the protest on the steps.
Similar arguments against tax increases that could cut sales or cost jobs were offered by water bottlers, who could have the state’s sales tax applied to their product; by insurance agents, stevedores and travel agents, who could lose preferential business and occupation tax rates; and by professional groups like doctors and architects, who could see their temporary business tax surcharge made permanent.
Retailers want the state to keep the exemption from the sales tax that residents of other states get when they shop in Washington.
Amber Carter of the Association of Washington Business said most of the taxes are being levied on businesses; most of the money would be used to improve schools and colleges.
“Education is a societal obligation. This puts the obligation on business,” Carter said.
Businesses were more supportive of the taxes for transportation projects, joining labor groups and mayors in urging the Transportation Committee to move forward with those taxes. Greater Spokane Incorporated supports the package, which has $420 million for the North Spokane Corridor, spokesman Jim Hedrick said.