April 25, 2013
Dear Friends and Neighbors,
We are in our final week of the 2013 legislative session which is scheduled to adjourn Sunday, April 28. The Senate has approved its operating budget measure, which came to the House and was amended by House Democrats to spend considerably more money for the next two years. On April 12, House Democrats voted out their operating budget proposal, which would rely on tax increases.
The House Democrats’ tax increase measure, House Bill 2038, would reduce or eliminate existing “tax preferences.” These are tax exemptions or reductions that have been intentionally granted by the Legislature over the years to help Washington businesses compete with other businesses outside the state. The measure would increase taxes by more than $900 million. It passed the House yesterday on a vote of 50-47, with almost all House Democrats voting in favor of it, and all Republicans and five Democrats voting against it.
Prior to final passage, Republicans offered two amendments that would have deleted the emergency clause in the bill and put the tax package before voters in the November election. An emergency clause allows the bill to take effect immediately upon the governor’s signature. But it also does something else very concerning – it would prevent voters from petitioning to put a referendum on the ballot. Democrats rejected our amendments, which means if this measure become law, voters would be unable to take it to a referendum.
The original tax bill included an increase on the B&O tax on marine cargo handling activities and insurance agents, and would have extended the beer tax and a sales tax on janitorial services. Fortunately, those were stripped from the measure in the House Finance Committee.
Nevertheless,we’re talking about a tax increase of nearly $1 billion. The Washington Policy Center estimates thousands of jobs would be lost if these tax increases are enacted. Many business owners testified Friday during the three-and-a-half hour public hearing on the bill in the Finance Committee meeting, and said tax increases would be devastating to them. You can watch that hearing on the TVW Web site: Watch part one | Watch part two. You can also listen to the hearing through these podcasts: Hour #1 (begins in progress) |Hour #2 |Hour #3 |#4 (only 15 minutes long)
Let us please remember: Washington is expected to take in $2 billion more in the coming budget cycle over the current one. We do not need tax increases to balance our state’s budget.
Below, I’ve provided a list of the proposed tax increases. I’ve also provided excerpts of testimony by those who would be affected by these tax increases.
If these taxes are not enough, Democrats passed a transportation revenue measure, House Bill 1954, in the House Transportation Committee on Monday that would boost gas taxes by 10 cents a gallon. I am also very concerned about an amendment that would give authority to the Secretary of Transportation to raise the tax an additional three cents a gallon if tolling on Interstate 90 is not implemented to help pay for the new State Route 520 bridge over Lake Washington. That would raise the total gas tax to 13 cents a gallon, and boost Washington to the state with the highest gas taxes in the nation.
Since there are vast philosophical differences between the House and Senate on these fiscal issues, it appears likely the Legislature will go into a special session to finish its business.
As always, your comments are welcome. You’ll find my contact information at the bottom of this e-mail update. Please do not hit “reply” to this report, as it will not reach me.
Thank you for the honor of allowing me to serve you!
House Bill 2038 – The House Democrats’ tax proposal – $1 billion
There are 14 parts to this bill. The first 11 parts would extend and increase taxes, and eliminate tax preferences (tax incentives to help Washington’s economy). Here’s a list of the tax increase proposals:
Part 1 – Would permanently extend the business and occupation (B&O) surtax on certain businesses ($534 million tax increase).
Part 2 – Would increase B&O tax rates for travel agents ($14.6 million tax increase). Components of this part have been removed from the bill that would have increased B&O taxes on marine cargo handling and insurance agents.
Part 3 – Would place a sales and use tax on bottled water ($51.5 million tax increase). This is the same tax that was repealed by voters in 2010.
Part 4 – Would repeal the nonresident sales and use tax exemption ($63.7 million tax increase). This could especially hit our border counties very hard along Oregon and the British Columbia borders. (See this 2011 opinion editorial from Reps. Terry Nealey and Ed Orcutt.)
Part 5 – Removed (Would have extended the beer tax to all beer manufacturers).
Part 6 – Removed (Would have imposed sales taxes on janitorial services)
Part 7 – Would increase taxes for high-tech research and development ($78.7 million tax increase).
Part 8 – Would increase taxes on truck transport of goods in state that are destined for out of state ($63.2 million tax increase).
Part 9 – Would increase B&O and sales and use taxes for import commerce ($24.2 million tax increase).
Part 10 – Would increase B&O taxes for sellers of prescription drugs ($29 million tax increase).
Part 11 – Would increase taxes for extracted fuel ($40.8 million tax increase)
What others are saying about these job-killing tax increases
These are quotes from those who testified Friday during the public hearing in the House Finance Committee.
“Before the recession started, I employed 370 people. We dropped to 280 at the middle of that downturn. The B&O surcharge – for me that was $120,000 to $150,000 additional taxes per year, which caused me to law off an additional two to three people. Each 10th of a percent in B&O tax surcharge is one person that I can either hire or let go. It’s that critical right now. And it is that fragile.”
Don Campbell – American Council of Engineering Companies
“Singling out small business for a tax increase is the wrong answer. It hurts our ability to recover and create jobs.”
Terry Wollam – Clark County Realtors
“You’re looking at roughly six hundred- to six-hundred-twenty-five million dollars on the backs of a single mom who cuts hair, or a sole proprietor who engages as an architect, or an attorney, or any number of things. Somebody who cleans your offices. They’re being asked for, now indefinitely, to pay the highest tax rate on the books.”
Patrick Connor – National Federation of Independent Business
“I want you to consider what you are doing to the poor, to the seniors, to the jobs. This is the worst economic bill I’ve read.”
Carolyn Crain, concerned citizen – Vancouver