Majority Democrats in the state Senate narrowly approved an $890 million tax package Sunday, setting the stage for a four-day sprint toward adjournment of their recession-plagued session.
Passage of the two tax bills — one with a bare minimum 25 votes — showed just how hard Democrats had to work to bridge a $2.8 billion budget gap at a time opinion polls show voter opposition to some taxes.
Six Democrats defected to the Republican side in opposition to the bigger of the tax bills — most prominently Sen. Rodney Tom, the Democrats’ No. 2 budget writer. Tom said the 21-tax package was too large, it relied on a sales tax that harms the economy and lawmakers failed to put state liquor sales and landscaping jobs into the hands of private businesses.
“We have just experienced the cost of inaction. The sacred cow’s still going to graze on the Capitol lawn and taxes will go up,’’ Republican Sen. Mark Schoelser, a wheat farmer from Ritzville, declared in a floor speech.
But Senate Majority leader Lisa Brown said her party had balanced a budget in the worst economic time since the Great Depression and kept services the public needs.
“We’ve done reductions in every functional area of state government ... Less than 10 percent of our solution is revenue,’’ Brown said, referring to a two-year budget gap that has measured some $12 billion. The tax package raises $890 million over the next 16 months and about $2 billion in the following biennium, when many of the taxes expire.
Even with the tax increases, Senate Democrats’ supplemental budget has spending cuts of almost $800 million that hit everything from health care to education and likely will eliminate hundreds of state jobs.
Sunday’s votes put the onus for action onto the House with time running out. House Finance Committee chairman Ross Hunter, D-Medina, said he hopes for a full House vote on a $758 million tax package as soon as today. That would leave three additional days for the House and Senate to bridge differences of a few hundred million dollars on their tax and budget bills, which Hunter considered long odds.
“We’ll know more likely in a day or two, after we see the House revenue package,” Brown said. “We have a lot to work out between now and the 11th. On the other hand we’re not dug in, we’re not broke down. That’s all good news for getting done.’’
The biggest vote of the day — if not one of the largest of the 60-day session — was on the larger tax package, Senate Bill 6143, which passed on a narrow 25-23 vote. Republicans were united against it, and Democrats voting against were Sens. Tom, Steve Hobbs of Lake Stevens, Claudia Kauffman of Kent, Derek Kilmer of Gig Harbor, Chris Marr of Spokane, and Tim Sheldon of Potlatch.
The tax bill authorizes about $805 million in new taxes — including a temporary quarter- percent surcharge on services and a temporary three-tenths of 1 percent sales tax increase and closure of numerous tax loopholes. The measure also lets revenue agents collect taxes against out-of-state firms that do business in Washington and it allows collection of unpaid taxes from a defunct firm’s chief executives.
It also puts the business-tax surcharge on a wide range of services provided by accountants, lawyers, medical practitioners, janitors, disc jockeys and others.
But Brown said it doubles a tax credit for small businesses, raising the threshold for payment of any taxes. It also provides a tax refund for low-income working families; the refund is equal to 5 percent of what qualifying families get from the federal Earned Income Tax Credit.
Other Senate proposals — such as the coal tax repeal that Republicans, including Sen. Dan Swecker of Rochester opposed — are not included in the House tax plan. The coal-tax exemption is worth $10 million for the TransAlta power plant near Centralia.
Swecker put out a statement criticizing the tax package, saying it will cost every state resident a total of $124 over the next two-year cycle. But he also specifically criticized the tax on the TransAlta plant in his district, saying:
“It’s misleading to suggest that ending tax incentives, which the majority mistakenly calls ‘loopholes,’ is not raising taxes. Those incentives are adopted by the Legislature after much consideration to do good things for this state.”
The Senate also approved SB 6874, which authorizes another $1 per pack tax on cigarettes, jacking up the state rate to $3.025 per pack. Sen. Tom said this was a step toward ending the state’s subsidy of tobacco products, which he said cost the public $8.50 per pack in health costs.
But Republican Sen. Mike Carrell of Lakewood said Democrats, if they believed that, should rocket the tax to $10 per pack. Carrell warned the higher taxes foster sales from out of state, lowering the state’s overall take.
The GOP’s hope of stopping the majority party’s agenda was always slim. And so, it may turn out, is the Legislature’s hope of getting out of town by Thursday night.
“I’m not packing to go home,” Senate Republican Leader Mike Hewitt of Walla Walla said.
Brad Shannon: 360-753-1688