Dear Friends and Neighbors,
The Legislature adjourned Sunday without having reached a final agreement on a two-year state operating budget. Since the end of the fiscal biennium is on June 30, the Legislature needs to reach agreement before that date on a budget that would fund the operations of the state between July 1, 2013 and June 30, 2015. Gov. Inslee decided to give the Legislature a two-week break and has called a special session beginning May 13, which could last up to – but no longer than – 30 days.
Why didn’t the Legislature finish its business within the 105-day regular session?
In the final days, it came down to the vast differences between operating budgets proposed by the Senate Majority Coalition Caucus (SMCC) and House Democrats.
The SMCC was formed in December by two Democratic senators and all 23 Republican senators. This bipartisan coalition passed an operating budget April 5 that would increase education funding by about $1 billion — and provide sufficient funding for the state’s other priorities, such as caring for the most vulnerable and public safety needs — all within existing revenue. The Senate budget would not increase taxes.
However, House Democrats passed their operating budget proposal, and to fund it, they approved House Bill 2038, a measure that would increase taxes by $879 million. Here is a list of those tax increases:
- $534 million – Would permanently extend the business and occupation (B&O) surtax on service businesses. These are the types of industries that might be affected, but not limited to: accountants, appraisers, architects, assayers, barbers, beauty shop owners, court reporters, employment agents, engineers, refuse collectors, janitors, kennel operators, landscape architects, loan agents, music teachers, oculists, orchestra or band leaders contracting to provide musical services, real estate agents, school bus operators, stenographers, warehouse operators who are not subject to other specific statutory tax classifications, theater operators, undertakers, veterinarians, and numerous other persons.
- $14.6 million – Would increase B&O taxes on travel agents and tour operators.
- $51.5 million – Would add sales and use tax to bottled water. (This is the same tax that was repealed by voters in 2010.)
- $43 million – Would repeal the non-resident sales and use tax exemptions, especially affecting border counties.
- $78.7 million – Would extend B&O taxes to high-tech research and development.
- $63.2 million – Would impose a public utility tax on truck transport of goods in state that are destined for out of state.
- $24.1 million – Would extend B&O and sales and use taxes for import commerce.
- $29 million – Would extend a B&O tax for resellers of prescription drugs.
- 40.8 million – Would add a fuel tax for extracted fuel.
- $5.2 million – Would create a handling losses fuel tax.
During a public hearing on this bill in the House Finance Committee, numerous employers spoke of how they are operating on razor-thin margins and said these tax increases would either force them to lay off more employees or close their businesses.
House Republicans and the SMCC agree that:
1. The economy is too fragile to adopt tax increases that would kill jobs and hurt families and employers; and
2. The state will be bringing in an additional $2 billion in the coming budget cycle – a nearly 7 percent increase in revenue – without tax increases. The Senate has passed a balanced budget that takes care of the state’s top priorities: education, caring for the most vulnerable, and ensuring public safety. We don’t need tax increases to provide a balanced state budget.
Democrats insist taxes must be raised before they will approve an operating budget. House Republicans and the Senate Majority Coalition Caucus have provided responsible budget plans that would fund priorities of government without raising taxes. It is this chasm that has sent the Legislature into a special session.
In your service,