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Dear Friends and Neighbors,

Congratulations! We've finally made it past “Tax Freedom Day.”  According to the Tax Foundation, a nonprofit educational organization in Washington, D.C., the money you have earned from Jan. 1 until April 15 here in Washington state is enough to pay your federal, state and local tax obligations. After April 15, the money you earn now can be kept for you and your family. That's Tax Freedom Day.  Read more about Tax Freedom Day here.

Unfortunately, I expect our state's Tax Freedom Day will soon be pushed out a little farther in the future. That's because the governor today is expected to sign a tax increase package of $794 million the Legislature approved before adjourning the special session April 13. Combined with the coming biennium, the tax increases will total more than $1.7 billion.

It's very disappointing because we could have restructured the state budget and covered the $2.8 billion budget gap WITHOUT RAISING TAXES! Unfortunately, that's not how this legislative session ended.

I am glad to be back home in the district and I'm looking forward to seeing many of you through the interim. However, my concerns remain with getting people back to work in this economy. That's how we can fix our state's budget problems.

Below is a press release I sent out last week, which outlines the tax increases and how they could affect our district.

Again, I appreciate the honor of serving you. Should you have questions or comments, please let me know.

 

NEWS RELEASE: Legislature does more harm than good this year

As the Legislature entered its final day of the special session, Rep. Dan Kristiansen reflected over the past 90 days lawmakers have been in Olympia and characterized this year's legislative session as “a massive train wreck engineered by majority Democrats with a lot of citizens unwillingly aboard.”

“It's been very disappointing,” said Kristiansen, R-Snohomish. “My Republican colleagues and I met with the governor a month before the session began in January and brought her a jobs package, which ultimately would have put many people back to work in the private sector by now. Our “Made in Washington” jobs legislation would have significantly reduced unemployment and the need for public assistance. Unfortunately, those ideas were completely ignored as the governor and majority party went directly for tax increases.

“With some of the highest unemployment rates in the state in nearly two decades, this legislative session should have been about jobs and what we could do to get people working again. Instead, Washington has higher unemployment now than it did when the Legislature convened in January and, unfortunately, we can expect a lot more people out of work when the new tax hikes take effect.”

To cover a $2.8 billion budget shortfall, majority Democrats in the House approved legislation Saturday, 52-44, that will increase taxes by nearly $2.5 billion over the next three years. Kristiansen voted no. The Senate followed suit today, approving Senate Bill 6143 by a vote of 25-21. All Republicans in both the House and Senate voted against the tax hikes and some Democrats also voted no.

“All of these tax increases will be detrimental to individuals and our state's economy. Even the governor said she could solve this budget problem by making changes internally without a tax increase. So why couldn't House and Senate Democrat leaders restructure the budget and prioritize spending for only the most essential services of education, public safety and the most vulnerable? Instead, they're sticking it to taxpayers at a time when our state is experiencing the worst recession in years,” noted Kristiansen.

Kristiansen said employers, blue-collar workers and the middle class will be hit the hardest with tax increases, which include raising business and occupation taxes on services, adding sales tax to candy and gum, and increasing taxes on soda, bottled water, cigarettes and beer.

“The 39th District has more people collecting unemployment benefits than any other legislative district. Now the state is going to take more from families who are already living with less and have had to cut their own budgets,” said Kristiansen. “The tax package picks winners and losers. Those who can afford to drink the high-end microbrewery beers won't have to pay, but those who drink regular beer will be paying much more. That's just one of many examples of how this tax legislation will affect the middle class.”

Monday, the House of Representatives approved a $30.5 billion supplemental operating budget which decreases spending by less than 1 percent from last year's budget. Senate Bill 6444 passed the House by a vote of 54-43. It later was approved in the Senate, 25-21. Again, Kristiansen voted no.

“It's unbelievable that while families are cutting back, there's actually new spending in this budget. The Legislature didn't tighten its belt. Instead, it continues the same old tax-and-spend policies that got us into this mess in the first place,” added Kristiansen. “This budget does nothing to help employers create jobs. Instead, it adds more mandates and finds more ways to tax employers. So that means we may see more businesses close and move out of the state, and fewer jobs in Washington. We're not going to be able to crawl our way, tax our way or spend our way out of this recession. The state needs to take a lesson from its citizens who are having to live within their means. Until we do that, we're going to continue to see huge budget deficits long into the future.

“It's very unfortunate, but I believe our state would have been better off if the Legislature didn't convene this year. As a result, every citizen is going to be feeling the pain and this difficult recession has now been prolonged,” concluded Kristiansen.

The following is an overview of the tax package which is heading to the governor:

Tax Package Overview – Senate Bill 6143

Description

Effective Date

2009-11
($ in millions)

2011-13
($ in millions)

Notes

0.30% B&O tax increase on all services except hospitals, scientific research and development (expires June 30, 2013)

5/1/10

$241.9

$483.1

Includes permanent doubling of small business B&O credit and increase in reporting threshold for service business from $28,000 to $46,667.

B&O tax increase on direct sellers

5/1/10

$155.0

$199.4

Dot Foods Court Case: Complete repeal of exemption as of May 1, 2010

Cigarette and other tobacco tax increases (HB 2493)

5/1/10

$101.4

$197.8

$1 per pack for cigarettes; OTP from 75% to 95% of wholesale price, 65 cent cap for cigars, weight-based tax for moist snuff.

B&O tax on economic income

6/1/10

$84.7

$407.3

Changes standard for applying B&O taxes from physical presence to economic presence. B&O deduction for aircraft loans (Alaska Airlines).

Beer tax increase – 50 cents per gallon (28 cents per six pack)

6/1/10

$59.0

$118.0

Exempts microbrews (60,000 barrels or less per year);

Sales tax on bottled water

6/1/10

$32.6

$69.2

Provides a refund for tax paid on prescriptions and those without an available source of potable water.

Soda pop tax increase – 2 cents per 12 ounces

7/1/10

$33.5

$72.4

Exempts carbonated bottled water. Exempts first $10 million of carbonated beverage sales.

Sales tax on candy and gum

6/1/10

$30.5

$62.4

Includes $1,000 B&O tax credit for in-state candy manufacturers until July 2012; Department of Revenue (DOR) must compile a list of candy that is taxable and not taxable.

Taxes on business structure transactions

5/1/10

$8.5

$30.4

Gives DOR authority to disregard certain business transactions or arrangements; creates legislative committee to monitor implementation.

B&O tax increase on property management salaries

6/1/10

$6.9

$14.8

Exempts non-profit property management companies and private companies that contract with public housing authorities.

B&O tax increase on certain canned meat products (from 0.138% to 0.484%)

6/1/10

$4.1

$8.8

Appli
es to canned meats, such as chili, soups, and certain canned fruits and vegetables

B&O tax increase on mortgages

6/1/10

$3.6

$7.9

Narrows definition of what can be deducted

B&O tax on corporate officer salaries

7/1/10

$2.1

$4.6

Applies 1.8% B&O tax rate to corporate board of director income.

Tax increase on bad debts

5/1/10

$1.7

$4.1

Limits deduction for uncollectable sales taxes only to the seller.

Livestock nutrient management tax increase

7/1/10

$1.3

$2.8

Repeals sales tax exemption until June 30, 2013.

PUD electric bills tax increase

5/1/10

$1.2

$2.2

Directly affects Clark and Grays Harbor PUDs.

Personal liability for tax debts

5/1/10

$1.1

$2.0

Expands number of corporate officers personally liable for unpaid sales taxes.

Additional lottery marketing (SB 6409)

7/13/10

$15.0

Assumes aggressive marketing of lottery for higher education will generate more money.

Washington State Convention and Trade Center hotel tax payment (SB 6889)

6/30/11

$10.0

Convention center pays state yearly for hotel tax credit against general fund. Not a tax increase, but shown as revenue on balance sheet.

TOTAL

$794.1

$1,687.2

In your service,

Dan Kristiansen

State Representative Dan Kristiansen, 39th Legislative District
RepresentativeDanKristiansen.com
426A Legislative Building | P.O. Box 40600 | Olympia, WA 98504-0600
dan.kristiansen@leg.wa.gov
360-786-7967 | Toll-free: (800) 562-6000