Article by Erik Smith. Published on Monday, March 22, 2010 EST.
Senate Makes the First Move Toward Compromise – The Complete Debate
By Erik Smith
Staff writer/ Washington State Wire
OLYMPIA, March 22.—House and Senate started getting nearer to a session-ending tax deal over the weekend as both chambers passed bills imposing steep hikes in taxes.
It was the first move in the dance that will end the Legislature’s 2010 session, setting in motion a formal negotiating process between the Democrats who control both chambers.
The House gave a little and the Senate gave a little, but a sales-tax hike proposed by the Senate remains the sticking point. The House says no, and at the internal financial details of their spending plans remain to be decided — whether to raid nearly $100 million from the state’s Model Toxics Control Act account, for instance. So there’s plenty of ground to be covered before the finish line.
Debate on Senate Floor
The Senate set things in motion Friday night with a 25-18 vote on its tax package. Debate lasted less than an hour, Republicans thundering their opposition to a tax plan they don’t have the votes to derail.
It wasn’t the climax – at least one more floor vote remains, once Democrats emerge from their closed-door negotiations and present the final deal.
But there were a few important things that happened along the way: The Senate scaled back its plan for a sales-tax hike, from 0.3 percent to 0.2 percent. It also granted a few exemptions to planned business and occupations tax surcharges, for realtors, non-profit hospitals and research and development facilities. Republicans went along with those ideas, but said the Democrats should have gone further, exempting everyone and starting again from ground zero.
And the final vote belied the Democrats’ support for the bill. Though it passed with just 25 votes, the bare minimum needed, the same Democrats voted no who have been voting no all session long, most of them from “swing districts” where they may face challenges from Republicans this fall.
The Complete Debate
Here’s what was said on the Senate floor on final passage – every speech from every member who spoke. In some cases, the words have been edited slightly for readability.
Helps Solve Shortfall
Senate Ways and Means Chairwoman Margarita Prentice, D-Seattle: “Currently the state faces a $2.8 billion shortfall. Over the years, many tax preferences have been afforded to various industries, and in recent years several court cases have greatly expanded certain tax preferences. This bill raises the state sales tax by .2% for three years, while providing a working families tax exemption. Many tax preferences are eliminated, modified and clarified, and also a definition of bona fide dues and fees is provided. This will have a significant impact on our budget.”
Some Businesses Get Preferential Treatment
Sen. Joseph Zarelli, R-Ridgefield: “Well, I have not changed my mind on this bill. I still think it’s bad for business, bad for jobs, bad for the public, and not the right way to close our budget problem.
“It’s amazing sometimes, when you pay attention to what’s going on on the floor and what’s being said, you actually learn something. I found that out today. And that is that this bill that we’re about to pass – prior to it we considered several amendments, and each speaker, mostly on the side I think that is probably going to end up supporting this underlying bill, in each of the cases made an argument as to why those particular industries would be hurt with the passage of this bill. [They] made the case for each one of those industries, that if we raise taxes on them, it’s not going to be good for them, it’s not going to be good for their businesses, and it’s not going to be good for the people they employ.
“Yet there’s nobody here to speak on behalf of the other thousands of businesses that are going to be hurt by what’s left of this bill. And one of those I want to share with you Mr. President. I had the opportunity to speak with Alaska Airlines, who, since entering this recession, between Alaska and Horizon Air, has had to lay off some 1,200 employees. The so-called nexus section of this bill, that we think is going to catch the big bad bogeyman out of state, is going to catch businesses like Alaska Airlines.
“This bill is going to cost them approximately $2.4 million. There’s no way for them to make up that $2.4 million, so I’m going to add one more to the list that somebody should have provided an exemption to that we did not consider, and that is Alaska Airlines, one of the sole airlines that we still have in the state of Washington. [It is] very important to our economy, employs a lot of people, and I suggest that to make up that $2.4 million, Mr. President, they’re going to have to do what they desire not to do, and that is to lay off more people.
“And I think every one of us can take a piece of this bill, as some have been represented here, realtors, nonprofit public hospitals, R&D facilities, all the businesses that we know are going to be hurt. And yet we’re going to turn around and injure other businesses, just because they didn’t have a representative directly on this floor today. I think this is not the way to grow us out of this economy [and] this recession. If we expect things to get better, we have to be a little more open-minded about the long-term implications of our decisions.
“This is a very shortsighted approach to solving a near- to long-term problem, and I am hopeful that this isn’t the last word we have on this. Even though we’re in a special session I am still hopeful that we still have work to do on this. This doesn’t get us there, folks. It is going to make it worse come the future.”
B & O Credit is Important Reform
Sen. Jim Hargrove, D-Hoquiam: “I’m not really excited about raising taxes. In fact, in my 26 years here, I think I’ve only voted for a small handful, maybe $400 million or $500 million over that period of time.
“…I think that what we are doing here is thinking about taxes last, thinking about taxes as the smallest piece of the solution. Four hundred and eighty-four million of that [tax increase] is temporary. Three years and it goes away. That’s been one thing that has made me come around as far as supporting some new revenue this time. We’ve got an extreme crisis and that crisis is going to be temporary, so the new revenue needs to be temporary.
“And then $320 million is loopholes, many of which I think all of us would vote for, the Dot Foods [case] and the other things that fit into the loopholes. Cigarettes, you know, you can have your opinion one way or the other.
“The other thing I wanted to point out is that with the B & O increase that’s in this bill, a temporary increase for services, there is a permanent doubling of the B & O tax credit for small businesses.
“Now, I happen to know somebody pretty well who is a consultant forester, and he makes about $40,000 a year. His current B & O tax liability is about $400 a year under our current system. His tax liability under this bill will be zero, and in fact you will have to make over $72,000 before the increase in service B & O actually increases your B & O rate, because of the doubling of the small business tax credit that is permanently instituted in this bill. That is tax reform.
“B&O, we know, especially on small businesses, is the most onerous type of tax. And this is reform in that case.”
Biggest Tax Increase in State History
Sen. Mike Carrell, R-Lakewood: “I do appreciate the fact that you’ve lowered the [sales tax increase] to 2/10 of a percent from three and some of the breaks that you have given people. But you need to know that this is still the biggest tax increase in state history, When you look at it over a biennium. It even dwarfs the one from ’93 and ’94, so this is massive.
“It is not good for the business or for people of the state of Washington. It is going to restrict business, and you have acknowledged that by getting rid of some of the increases, you should be getting rid of them all, and rethinking our priorities down here in Olympia. But that’s not what we are doing. Because of the overspending, we are raising taxes.”
Spending Problem Led Us Here
Senate Minority Leader Mike Hewitt, R-Walla Walla: “I think it’s important to talk about the size of this package. We’ve talked about all the cuts that are taking place, but the fact is this biennial budget is going to be $2.2 billion more than the budget we had just two years ago.
“We have a graph in our caucus room that says we don’t have a revenue problem, we have a spending problem. We were trying to figure out the other day how long that was up there, and as we trace that back, that’s been up there five years. Five years we’ve had that in our caucus room.
“So I’m really sorry that we’re in the place we are in today. It’s unfortunate that we have to make some of the moves we have to make today, but I guess now that we are here, that’s all that we can do, be in overtime and raise taxes.”
Soaking the Fat Boys Doesn’t Work
Sen. Cheryl Pflug, R-Maple Valley: “With the consent of the President, I’d like to read a couple of messages from my constituents.
“This from a constituent in North Bend: ‘I’m a teacher feeding at the public trough, but I cannot support new taxes at a time that our state and nation are struggling to emerge from a recession. Soaking the fat boys doesn’t work. We just end up losing jobs and investments in research and development. Doesn’t anyone remember how we fought our way out of the recession of the early 1980s? President Reagan pulled less money out of our pockets, and we responded with the technological revolution of the 1990s.’
“And from an Issaquah constituent. The subject line, ‘hopelessness.’
“‘That is what it feels like – hopelessness. Fighting tooth and nail against an enemy to the state and the people. I realize that there are several people in this state who do not care if they are taxed out of existence. Mostly because they think they are doing some good, but I feel like my freedom is slowly being taken from me and there is nothing I can do about it. I too feel for those who are without employment and who are on the welfare rolls. I’ve been there myself. But first I found that I needed a job, and I worked cleaning toilets and floors. I went to college and got my bachelor’s, and in the meantime, while looking for work, I found a good stable job.
“‘It didn’t pay much at first. I put in my time and was always the first one at work. I got promoted three times. This is what the poor need, a job, not congenial handouts. Handouts are opiates. Let’s stop making it difficult for businesses to hire, because of raising their taxes on a continual basis. When the businesses have more money, they will hire more people, and when people have more money, they will spend more money. Ergo, when times are good, people will not mind putting more money into taxes. Now is not the time to increase taxes on businesses and the public.’
“I think my constituents say it better than I can.”
People Will be Proud to Pay
Senate Majority Leader Lisa Brown, D-Spokane: “State government in Washington state balances our budget every year, and we are doing that again this year, and we’re doing it in the toughest economic times we have known since the Great Depression. I think it’s already been pointed out that only a small percentage of our total problem of $12 billion, is being solved with revenue. I will tell you personally that I wish this package was larger and contained more structural reform so that our lower income hard-working citizens were not paying such a disproportionate share of taxes, compared to our more affluent citizens. But this is the structure that we have got.
“I am proud that we have made modest reforms in this package so that the emphasis here, while it is a tax increase in total, means that thousands of small businesses will actually be better off after this package passes. And tens of thousands of families across the state, more than 25 percent of the families in my district, qualify for the earned income tax credit and will be able to take advantage of a small state rebate that honors the fact that they worked and played by the rules, and yet they pay a disproportionate share in taxes.
“I’d like to point out that yes, there’s more money here, but there are more people in our state. There are more kids in our schools, there are more seniors in our nursing homes there are more prisoners in our prisons, there are more D.D. kids graduating without employment. All of these things grow, so guess what? The state budget also grows, and more than half of the general fund budget goes to education. If we want to create a future for our families and our children, then we need to commit to shared responsibility and shared sacrifice. Service businesses will pay a little bit more.
“Families in our state will pay $20 more, $20 more on average in the sales tax, and I think many of them will be proud to stand up and say, here’s 20 bucks to keep class-size down, here’s 20 bucks to help folks in nursing homes, here’s 20 bucks to pay health-care expenses. And I think that that ethic of shared responsibility and shared sacrifice is what were doing today. I’m very proud of our state balancing its budget on an annual basis, even during tough times, and I would encourage people to support this budget.”
The Idaho Economic Development Act
Sen. Mark Schoesler, R-Ritzville: “Well, the math here is kind of interesting. Twelve billion dollars in cuts? No, that’s $12 billion from the wish list. If we would have actually cut $12 billion from the previous biennium, I don’t think any of us could have voted for a budget, but we really didn’t. That’s Olympia math. The size of the increase, that’s Oly math. That’s not hard dollars.
“I have to say that the majority has made the package a little bit better today, but unfortunately some of the decisions in it picked winners, a few, but picked a lot of losers in other categories. And I have to say that when this bill passes out of here today that we can tell Gov. Otter over in Idaho that the Idaho Economic Development Act has passed another hurdle.”
B & O Tax Credit Doesn’t Help Much
Sen. Curtis King, R-Yakima: “Well, I don’t have a lot to say on this bill. You all know how I feel about it already. But it’s interesting that we talk about this B & O tax credit. One of the good senators previous to this said that a person or business would have to make $72,000 before they would have to pay any of this B & O tax.
“Well, there is a difference between making $72,000 and having sales of $72,000, because a company that has sales of $72,000 doesn’t necessarily make a dime. We keep saying if you only make $72,000, you don’t have to pay any excise tax now. There’s a lot of difference between a profit of $72,000 and sales of $72,000.
“We all ought to think about how many of our small businesses had sales of only $72,000. Not very many. And those are the ones that are going to put this state back in business.
“It’s small business that’s going to get us out of this economy. We keep wanting to sugar coat all this. You can talk all you want about the B & O credit that we’re going to be giving these small businesses, but I don’t think this is the way we ought to be going.”
Something for the Children
Sen. Rosemary McAuliffe, D-Seattle: “While this is a very tough time and we are all very conscientious about the fact that we are closing tax loopholes, cutting the budget and that we need some revenue in order to preserve funding for public schools, colleges and universities. And that is what we are doing today.
“It is about our children’s future. It is about being sure that earliest learners have the opportunity to learn, those that have the greatest need. It is about our children in our K-12 public schools having a class-size they can be able to learn in. You talk about what we receive in our e-mails. Let me tell you what I receive in my e-mails. If I may read Mr. President?
“‘I support the full funding of Washington public schools. We are now millions below adequate school funding. Please find new revenue. Please protect public school funding in the state budget. Please protect funding for smaller K-4 class sizes and all day kindergarten, so that all our earliest learners can learn. Class size, when kids are learning crucial skills like reading, is a critical factor. We should continue to help tomorrow’s citizens of this state. Please support the funding for education.'”
“That is what we are doing here. We do not want to cut our children’s future. Please support this budget. It is something that we need to do for our children in the state, for their future.”
Other Side of the Equation
Sen. Adam Kline, D-Seattle: “Let’s take a look at the larger picture. A visitor to this state, not knowing our tax structure and just hearing today’s debate, might think that we are concerned only with hurting businesses that end up paying.
“I don’t think there’s any one of us on this floor that doesn’t recognize that it hurts a business that has to pay a tax. Of course it does. But let’s also talk about the other side of that big equal sign. Remember, we’ll balance the budget. When we resolve this budget this will be a balanced budget. There is an equal sign on the equation, and on the other side of the equal sign are, as the previous speaker pointed out, students in our schools. And I might add, people that are trying to go to college and wishing they can afford it. Also patients in hospitals, patients who are in clinics and on BHP [Basic Health Plan], vocational education for people who have lost their jobs and need to be retrained. There is a long list of people on the other side of that equal sign.
“Yes we can talk only about the taxes, taxes, taxes. But let’s talk also about the people who benefit from the services that this state has always provided as part of its core mission.”
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