Senate Approves Sales Tax a 3rd Time, Passing Smaller Sales Tax & More Tax Breaks

Facing opposition from both the state House and the Governor, the Washington state Senate reaffirmed its support for a general sales tax increase this afternoon by passing a sales tax a third time (the second time in this week’s special session).

As a move toward compromise with the House and Governor, which prefer more targeted tax increases, the Senate’s ESSB 6143 reduced the proposed general sales tax increase from three tenths of a percent to two tenths of a percent, moved the date that a bottled water tax would begin to a month earlier, and proposed a series of exemptions from B&O tax increases for non-profit hospitals, realtors, and firms’ research and development expenses.

Sen. Rosa Franklin (D-Tacoma), who proposes a bill to create an income tax in Washington state each year, and who voted against the Senate’s tax package in regular session for being too regressive, voted for the Senate’s tax bill this time around. Indeed, she even introduced the amendment to it which reduced the proposed general sales tax hike from three tenths of a penny to two tenths, saying that while she has in the past expressed “fierce opposition to raising the sales tax,” that “bringing it down to two tenths of a percent gives some relief, and it makes it more palatable to support, also giving some relief to small businesses for B&O tax relief.” NPR reporter Austin Jenkins had previously speculated that the state Senate gave a hearing for Franklin’s income tax bill a week before the end of the legislative session less to move the bill and more to get Franklin to vote in favor of increasing the sales tax. If that is indeed what happened, it worked. And was necessary, since the package passed with the minimum 25 votes needed.

State Senator Rodney Tom (D-Medina), who helped craft the Senate’s budget only to vote against it, and who still is assisting with the Senate’s budget negotiation team, voted against the Senate’s tax bill.

Many Republicans were not present for the vote, since they constitute less than 60 percent of the chamber and have been excluded from budget negotiations for both the regular and special session. But a few did speak out against the tax increases.

While his colleagues mainly complained about tax increases on principle, Senator Joseph Zarelli (R-Ridgefield) more specifically accused the Democrats of hypocrisy for passing new tax increases on business but then passing a new series of tax exemptions. Zarelli called the bill “bad for business, bad for jobs, and bad for the public.” He complained that Democrats’ tax exemptions  demonstrated that for some businesses, they recognized that raising taxes “is not going to be good for them, for their businesses, for the people they employ… yet you’re going to turn around and hurt other businesses because they did not have a representative on this floor today.”

State Sen. Jim Hargrove, a member of the “Roadkill caucus” of middle-of-the-road Democrats, praised the Democrats for “thinking about taxes last,” and for making it “the smallest piece of the solution” to the $12 billion 2009-11 biennium budget deficit. He passed out a chart showing that only seven percent of which was filled by new taxes, with 48 percent of the deficit closed through budget cuts. He also praised the Senate for making temporary half of the $800 million the Senate proposes to raise– a reference the general sales tax increase, which in the new proposal would be eliminated in 2013.

Senate Majority Leader Lisa Brown, who has claimed to support an income tax, stated “I wish this package was larger and contained more structural reform.” But she went on to say that she felt that the Working Families Tax Rebate, which 25 percent of her constituents would qualify for, will help mitigate the otherwise regressive nature of a general sales tax increase.

The Senate’s bill now goes back to the House, mainly as a bargaining chip for Senate negotiators to wield as a show of resolve against opponents of increasing the sales tax.

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