Senate Fails To Override Veto Of Tax Cut But House Quickly Approves Measure To Delay Reduction Until 1998

The Republican-led Senate on Tuesday failed to override Gov. Gary Locke’s veto of a business and occupation tax cut that would have taken effect July 1.

Hours after the vote, the House passed a bill 97-1 that met Locke’s demand that the tax reduction take effect July 1, 1998. Eileen Cody, D-Seattle, cast the lone negative vote.

Rep. Brian Thomas, R-Issaquah, said the House’s majority Republicans agreed to accept the governor’s plan “in the spirit of bipartisanship.”

Locke, a Democrat who has been bruised in other tax scuffles with the Legislature, said earlier in the day he was pleased at the override failure and that the Legislature was willing to see things his way.

Locke had refused to approve the B&O tax reduction for service businesses effective this July because of its $202 million cost.

“We’re all in agreement that the tax should be lowered,” Locke said, but added that lawmakers left him no choice but to insist on a one-year delay after sending voters a proposal to cut property taxes by $220 million.

Locke said his budget assumes voters will approve the property tax cuts, leaving the state treasury about $100 million short of what would be needed to finance a B&O reduction this year.

Legislative Republicans don’t agree with that arithmetic. Nevertheless, said House Speaker Clyde Ballard, R-East Wenatchee, the House was “ready to run” with the proposal to reduce the tax starting in July 1998.

Senate Majority Leader Dan McDonald, R-Bellevue, said earlier he did not expect the 23 Democrats in the 49-member Senate would help override Locke’s veto. He was right. The vote divided along party lines, with all 26 Republicans voting to override. Thirty-three votes were needed.

Noting that virtually all the Senate’s Democrats supported the tax cut when it passed the chamber Feb. 17, McDonald said he wanted to “make people stand up and take another vote.”

Senate Minority Leader Sid Snyder, D-Long Beach, had no apologies for the Democrats’ change of heart.

He said Locke made the right call in vetoing the reduction.

“The timing isn’t right,” Snyder said.

The tax cut would 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. The rates would be rolled back to their levels before 1993.

Earlier this session, Locke vetoed two property tax measures, worth a total of about $220 million over the next two fiscal years, because of doubts the state could afford them. Legislative Republicans, unable to override those vetoes, rolled the measures into one bill and passed it as a referendum to the people, bypassing the governor’s desk.