House drops sales tax from budget plan

OLYMPIA – Using a compromise plan suggested by the governor, House Democrats stripped an increased sales tax out of plans to balance the state budget and countered with higher business taxes. Saturday afternoon the House voted 53-42 to stake out different territory in the efforts to combine tax increases with program cuts and federal money to fill a $2.8 billion budget hole. The proposal got no support from Republicans, who called it at various times a job killer, legalized plunder and a pathway to socialism. It lost several Democrats, too, including Rep. John Driscoll of Spokane. But Democrats who supported the bill said it was necessary to leave class sizes small, cover health care for the poor, keep guards in the prisons and state troopers on the highway. Much of the package was proposed by Gov. Chris Gregoire late Friday in an effort to strike a deal between two very different tax approaches in the House and Senate. The two bills now become the basis for negotiations expected to take place over the weekend. The House bill passed Saturday: • Places a three-year surcharge on the business and occupation tax levied on many service businesses, raising the tax to 1.75 percent, up from 1.5 percent of gross receipts. • Applies the sales tax to bottled water, to take effect May 1. • Levies taxes on out-of-state companies that do business in Washington. Some of the language reinstates taxes thrown out by court decisions. • Taxes manufacturers of custom software. Cut from the tax bill are: • The two-tenths of 1 percent sales tax increase approved Friday by the Senate. • A sales tax to candy and gum and taxes on elective cosmetic surgery. Some Republicans painted the bill in the most dire of terms. “This bill is not about helping people, this bill is about the ruination of the state,” Rep. Matt Shea, R-Spokane Valley, said. “Idaho is looking better all the time, and Gov. Butch Otter is going to be there, welcoming people with open arms.”“I look at every section and ask, ’Is this going to create jobs or is this going to kill jobs?’” Rep. Joe Schmick, R-Colfax said, adding he didn’t see much job creation. Other Republicans argued the spending would boost government jobs while the taxes would harm non-government jobs. But Rep. Mary Lou Dickerson said the bill does save jobs, and not just for state workers. It provides money for workers in senior centers and nursing homes, for doctors, nurses and other health care workers who care for patients covered by the Basic Health Plan, people who work with the developmentally disabled and the chemically dependent. Rep. Steve Conway, D-Tacoma, questioned the Republicans’ aversion to government jobs. The state is pulling for the Boeing Co. to win a $40 billion contract from the U.S. Air Force to build new tankers, and those would all be government jobs, funded by the taxpayers, he said. “Don’t tell me that tax dollars don’t create jobs. Today we do the right thing,” Conway said.