Tax extension for breweries off the table

OLYMPIA – Some businesses and their customers could see higher taxes starting this summer as the state tries to increase the money it spends on public schools, but beer-makers and the folks who consume their products aren’t likely to be among them.

A key committee dropped breweries from its list of businesses that would see their tax exemptions eliminated or narrowed under a plan to pay for the House Democrats’ version of the 2013-15 state operating budget.

The vote by the House Finance Committee took place as leaders in both chambers maneuvered to pass bills needed to make their budgets viable. Negotiations must resolve conflicts before the regular session ends Sunday or a special session will be called.

The coalition controlling the Senate, meanwhile, passed several changes to state law needed to make its budget work, allowing part-time workers for the state, public schools and colleges to be shifted to the planned medical insurance exchange being set up under federal health care reform. It also approved major changes to the way the state pays for some education programs.

The House tax package would have reduced but extended a temporary surtax on large breweries and added a tax on microbreweries, which were exempted in 2010 when the tax was imposed.

Beer distributors, microbreweries and their fans protested last Friday along with other businesses facing higher taxes. Beer tax opponents then took their protests to the Capitol steps, with signs, speeches and chants of “We’re here, we’re beer. Get used to it.”

Also dropped Tuesday from the list of businesses that would have a preferential tax rate ended or trimmed were insurance agents, stevedores and janitors. Still on the list for a possible tax increase are professional services such as doctors, lawyers and architects; residents of states who are currently exempt from the sales tax when they shop in Washington; and bottled water, which is exempt from state sales tax.

Gov. Jay Inslee, who also proposed extending the beer tax and removing some of the other tax exemptions bumped from the House, called the committee’s action part of the normal legislative process.

“One way or another, we need to get there,” Inslee said. “There’s a lot of work to be done.”

The taxes left on the House’s list would raise about $900 million in the next two years and go into a trust fund to pay for changes in the state’s public education system, which the state Supreme Court has said must be improved.

“We have tough, difficult choices,” said committee Chairman Reuven Carlyle, D-Seattle. “We’re asking everyone to contribute to our quality of life.”

But Rep. Terry Nealy, R-Dayton, said the committee was “taking a butcher knife to these businesses rather than a scalpel. We’re picking winners and losers among our businesses.”

He and other Republicans also noted the Senate budget spends an extra $1 billion on public schools without raising taxes.

“We don’t need new taxes to balance our budget,” said Rep. Ed Orcutt, R-Kalama. “It’s the courage to fund education first and say no to some other people that we need.”

Republicans also tried unsuccessfully to add a clause requiring the tax increases to be sent to voters in November. Carlyle argued it was the role of the Legislature to eliminate tax exemptions it has approved over the years that may no longer be working as initially intended.

Carlyle said the full House could vote on the tax package as early as today.