Politics & Government

Taxes divide House, Senate

The budget impasse at the Capitol is expected to continue past Easter, pushing state lawmakers closer to the end of their 30-day special legislative session.

Senate Democratic leaders still were hanging on to a temporary sales tax increase Thursday as part of their $800 million tax package to bridge a $2.8 billion budget gap. Their inability to get 25 votes for other substitute taxes appears to be a major sticking point with the House, which says it can’t get votes for a sales tax.

“We’ve got some big hurdles to get over; (we’re) somewhat maybe slightly closer but some big hurdles to get over,” Senate Democratic Caucus Chairman Ed Murray of Seattle said Thursday.

Murray said the Senate Democrats, who have zero support from the GOP for raising taxes, have “a variety” of plans they are talking about, and some of them might not include the sales tax. He also said the sales tax is less likely to survive in any final agreement.

Murray disputed reports that a tax deal was at hand, and he dismissed claims by House leaders that Senate Majority Leader Lisa Brown, D-Spokane, had a new proposal in the works to break the deadlock.

Gov. Chris Gregoire called lawmakers in for the overtime session after the House and Senate were unable to find votes for a tax package and supplemental operating budget in their regular, 60-day session. The special session started March 15, which makes April 13 the new deadline to finish.

Minority Republicans are complaining about the costs of the session and a lack of action on bills that spur job creation. So far, session costs are about $170,000, according to estimates from the House and Senate administrative offices. The House has estimated that its costs have been as low as $1,000 on days when most members are gone, as they were Thursday; on actual session days, costs are higher, but not as high as during regular session because there is less staffing and many members turn down their $90-a-day per diem.

Despite the lack of progress, the House is set to be back in full session today to consider an enhanced-911 emergency system tax on cell phones, which the Senate approved Thursday. House Democrats also are learning about a new approach to temporary worker layoffs, which labor unions are fighting. The latter piece is a key element in any final budget agreement.

House Speaker Frank Chopp, D-Seattle, said he, Majority Leader Brown and others keep talking about taxes, and he credited Brown with a new approach that might break the tax deadlock.

“I think Lisa was potentially working on a new approach on the revenue. So we’re looking forward to seeing what she has in mind,” Chopp said.

Brown plans a meeting with reporters today, but Murray said there was no new deal or proposal in the works. Rather, Senate Democrats are working individually with members and asking whether changes to a variety of proposals might win or retain their votes, Murray said.

The dispute over taxes is more complicated than whether the Senate can simply drop its proposal for a 0.2 percent temporary sales tax. That is because the Senate is holding firm on raising $800 million in new revenue to blunt cuts that are likely to exceed $4 billion over the 2009-11 budget cycle.

But to reach that level of revenues without $200 million from the sales tax requires Senate members to accept other tax ideas for which Brown and Murray are unable to get 25 votes, including a tax on some first-mortgage interest earnings of banks; adding sales tax to custom software transactions; and ending a sales-tax exemption for out-of-state residents, whose purchases help border-county businesses.

On the flip side, the House opposes repeal of a $10 million tax break for coal purchases by the TransAlta power plant in Centralia and other Senate proposals.

Gregoire planned a meeting with Chopp and Brown late Thursday, and House Majority Leader Lynn Kessler said she was hopeful that some kind of agreement will be reached next week. If that happens, Kessler said, lawmakers will return April 9 and try to finish by Sunday, April 11.

Staff writer Jordan Schrader contributed to this report.

Brad Shannon: 360-753-1688