Article by Erik Smith. Published on Sunday, April 11, 2010 EST.

Lawmakers Have Their Eyes on the Exits – Republicans Shrug

State Rep. Doug Ericksen, R-Ferndale, makes one of the few speeches of the evening.

By Erik Smith

Staff writer/ Washington State Wire

OLYMPIA, April 10.—When lawmakers reach agreement on taxes and spending, the most dangerous place to stand is in front of the exit door.
            That’s what happened Saturday evening in the state House. Democrats appeared to reach agreement on an $800 million tax package and passed it 52-45, and not even Republicans made much of a fuss. There wasn’t much point in making speeches, they said, when everything seems a done deal.

            Lawmakers face a deadline of Tuesday at midnight to wrap up the business of the 2010 Legislature and call it a session. After weeks of bickering over a budget-balancing tax increase that will total $2.3 billion over the next three years, Democratic leaders finally came up with a deal that will raise taxes on beer, cigarettes, candy, gum, soda pop, bottled water, and a host of other items consumed by Washington residents every day.

            The tax plan, the most contentious item before the Legislature, now moves to the Senate for approval, possibly Sunday. Lawmakers still have to pass a budget and other bills associated with it. But passage of the tax bill in the Senate remains the only real hurdle – and once that happens, everything else is a formality.

            Republican leaders in the House said there was nothing they could do to stop the rush, and decided not to put up one of their usual floor battles when the tax bill came to the floor Saturday evening. Instead, they cut off debate after a handful of speeches and called for a vote.

            “We were all going to get up and make the same point over and over again,” said House Minority Leader Richard DeBolt, R-Chehalis. “They’re just going to do it anyway. It’s the majority’s perogative to raise taxes.”

            Triple-A Wins its Battle

            The $794 million tax package lawmakers are considering has been whittled down by $7 million from the deal that was announced by lawmakers a few days ago. A little less than half of the tax increase is scheduled to expire after three years – enough, lawmakers say, to get the state through a short-term cash-flow squeeze caused by the recession.

            Most of the changes were aimed at satisfying Democrats who were reluctant to support the bill, said House Finance Chairman Ross Hunter. “We tweaked all sorts of little things to work out problems. The vote’s very close, obviously. We worked pretty hard to try and not do damage to in-state business.”

The most substantial change is the elimination of a new business and occupations tax on private-club dues and initiation fees. That was intended as a soak-the-rich measure, aimed at the country-club set. But it turned out that more than half the $1 million that would have been raised would have come from the state auto club – hardly an exclusive organization.

            A close comparison of spreadsheets also shows that there has been other tweaking to the tax deal in the last few days. Revenue estimates tell the story. Lawmakers are assuming that they will make a little less from a three-year surcharge on business and occupation taxes, and a little more from the candy and gum tax. A new exemption for in-state pop bottlers will reduce collections from that tax, which will amount to two cents a can. They also have boosted estimates on a few speculative items – most notably an effort to collect business and occupations taxes from out-of-state businesses with activity in Washington, mainly banks. The estimate on that item has gone up by $2.3 million.

            Joe Sixpack Takes One in the Gut

            There’s a central irony in the Legislature’s debate over taxes. What tripped up the Legislature for weeks was a squabble between Democrats in the House and Senate over a modest increase in the state sales tax. Senate Majority Leader Lisa Brown lost that battle, and the place of the sales tax was taken by the taxes on beer, soda pop, candy and gum.

            House Democrats and the governor argued that an increase in the sales tax would hit hard at the beleaguered construction industry, which has been hard hit by the recession. But just as important was the idea that the sales tax is regressive – that is, it takes a bigger bite from the state’s lowest-income residents.

            On the other hand, the increases in the consumer taxes hit low-income people just as hard, if not harder, and they will be even more noticeable.

            In one of the few speeches on the House floor Saturday, state Rep. Doug Ericksen, R-Ferndale, pointed out that the beer tax hits “Joe Sixpack” in the gut. The Democratic plan raises taxes on plebian beers, but not on yuppie microbrews.

            “Wow,” he said. “That’s the most regressive tax I’ve heard of.”

            Ericksen twisted the knife: “And that’s the best we could do in 30 days of a special session – to raise the beer tax on the working people?”

            GOP Wins War of the Press Releases – By Default

            It was the briefest debate the Legislature has held on the year’s most contentious issue – somewhere between 10 and 15 minutes. But when all was said and done, not a single Democrat issued a victory statement, and Republicans appeared to have saved their epitaphs for their press releases.

            Because no real floor debate took place, here’s what lawmakers said in their press releases – all of them issued by Republicans:    

Elitist Taxation of the Working Class

Rep. Joel Kretz, R-Wauconda: “When you boil down the tax package, it’s a serious blow to job creators and those looking for work. After nearly a half-billion dollar increase in payroll taxes on employers this year, hitting them up again for millions more in taxes is simply irresponsible. How are our small businesses supposed to hire and retain employees when they know the financial hit coming at them, and that there is no end in sight for the government’s tax appetite? This could be the final blow to our battered employers and those looking for work.

“I am also concerned the majority party is relying on taxes on canned meats and other food staples that many of our families purchase to make meals stretch a little farther at a minimal cost. These taxes will hurt those struggling the most. One example of the elitist taxation of the working class is that Seattle microbrew drinkers won’t be taxed under this package, but the blue-collar worker who buys the less expensive American beers, like Coors, will be taxed. How is that fair?

           “Folks in my district are facing double-digit unemployment so making anything more expensive or making it more difficult to find a job is irresponsible. Not to mention, the majority is relying on unpredictable revenue from cigarettes, bottled water and candy. This is not the kind of budgeting practice that leads to sustainable funding for necessary programs.

           “We cannot tax ourselves to prosperity. I do not believe new and higher taxes are the solution to our budget issues. House Republicans offered ideas to reform government and find efficiencies, but the direction toward taxes was made clear after Democrats repealed the Taxpayer Protection Act in February. We need to put people back to work and give employers certainty in our tax and regulatory structure – these are the steps that will lead to a healthy economic recovery. These new and increased taxes will only serve to erode the slight recovery parts of our state were beginning to experience.”

Sad Day for Struggling Families

Rep. Ed Orcutt, R-Kalama: “This is an $800 million-a-year financial hit that our families, our employers and our economy cannot afford. If Democrat budget writers had put half as much effort into balancing the budget through true government reforms and efficiencies as they put into arguing with each other over which taxes to raise, we’d have a balanced budget, no tax increases and no special session.

“Instead of spending 30 days sharpening our pencils, applying the priorities of government process and implementing meaningful government reforms, budget writers from the majority party haggled over who would be the ‘winners and losers’ while resorting to tax increases.

“This is a sad day for struggling families and employers. This tax increase represents the largest tax increase in state history and it will have a negative impact on our chances for economic recovery.

“Washington’s employers are hit especially hard with B&O tax increases and our convenience stores are brutalized with new and increased taxes on bottled water, beer, cigarettes, soda, candy and gum making our tax system even more regressive.  Border counties, like those in my district in Southwest Washington, are going to lose precious jobs because of these tax increases.”

Taxes the Unemployed While State Employees Get Raise

State Will Face a Bigger Problem Next Year

Rep. Gary Alexander, R-Olympia: “Families and employers continue to make sacrifices, yet ‘business as usual’ continues in state government.  These tax increases are not going to help our economy or help get folks back to work.  Unemployment in our area is already around 15 percent.  The actions taken by majority House Democrats today will only make things worse.

“We have to remember how we got here.  Yes, the national recession has hit every state hard, but just a few years ago, Washington had a budget surplus of over $2 billion.  Unsustainable budgeting practices and unrealistic expansions in state services have led the majority party to place the burden on taxpayers rather than face the facts and bring government spending back in line with government revenues.

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