Controversial B&O; Tax Cut Moves Closer To Locke’s Desk Senate Gives Ok; Governor Likes Bill, But Fears Erosion Of State Reserve Fund

As expected, the Senate on Monday sent the House a $202 million reduction in the state’s main business tax, the latest in a tax-cutting spree that is furrowing the brow of Gov. Gary Locke.

By a vote of 44-3, the Republican-controlled Senate approved rolling back the business and occupation tax on gross business receipts to its level before 1993, when the tax was raised to help plug a budget deficit.

The measure is expected to zip through the GOP-led House.

Locke, a Democrat, also likes the bill. But in a brief interview Monday, he repeated his contention that the Legislature is passing too many tax cuts without regard to the cost.

“They’ve been spending more money than is in the reserve, and that’s troubling to me,” he said.

Locke declined to say if he would veto the measure if other tax cuts already passed or heading his way eat up a revenue surplus he calculates at between $200 million and $400 million. The surplus was a byproduct of citizen Initiative 601, which put a lid on state spending.

Locke signed a property tax cut measure last month and must decide whether to veto or sign a second, bigger property tax reduction by Wednesday.

The cost of those two cuts would be about $220 million, leaving Locke short by at least $20 million to pay for the B&O cut.

“We’ll just have to see what develops,” he said.

Before the Senate vote, members of both parties agreed it was time to reduce the B&O levy as it applies to a variety of service businesses, such as architects, lawyers, real estate agencies and engineers. The businesses would see their B&O rates decline .1 percent to .5 percent, down to 1.5 percent of gross receipts.

However, Democrats echoed the governor’s complaint about the timing.

“We’re passing all these tax cuts before we’ve even had a chance to look at the budget,” said Senate Minority Leader Sid Snyder, D-Long Beach.

Snyder said he wonders whether the tax breaks will cut into money set aside for the budget, dimming chances to spend more for schools and health care as the GOP has promised.

Republican leaders, who estimate a revenue reserve sufficient for tax cuts of $470 million, say there is enough money to accommodate big cuts in both property and business taxes.

Three Democrats voted against the measure, SB7902. They were Sens. Margarita Prentice, Adam Kline and Pat Thibaudeau, all of Seattle.