Politics & Government

Lawmakers handed tax windfall

The Washington State Capitol in Olympia. (Tony Overman/The Olympian)
The Washington State Capitol in Olympia. (Tony Overman/The Olympian)

Washington’s three-month tax amnesty for businesses delivered a surprisingly fat cash bonanza, it was revealed Tuesday, giving House and Senate budget writers $182 million more than anticipated to help close the budget gap.

“This is money that has already been collected in this fiscal year,” Gov. Chris Gregoire said at the Capitol as she announced an overall haul of $321 million from the amnesty – more than double what she expected after the March revenue forecast. “It is cash on hand. It gives us critical dollars to close the current (budget) gap.”

The governor told reporters at the Capitol that the new cash should be used to shrink the $240 million owed to public schools by June 30 that otherwise would be delayed to July 1 under House and Senate budget proposals. Gregoire urged that approach to the four legislative caucus leaders and four budget negotiators earlier in the day and said she sensed “they welcomed my suggestion.”

“I was pretty amazed. I didn’t know there were this many people out there that owed us money,” said Republican Rep. Gary Alexander, ranking minority in the House. “That program proved to be much more successful than projected. That is going to be very helpful to us.”

Top Democratic negotiators in the Senate and House could not be reached to comment, but Alexander said “the governor’s proposal made sense to me.”

All told, 8,888 enterprises paid their back taxes – thus avoiding penalties and fines under the amnesty – to generate $321 million. Of the total collected and in hand, $57 million is for local governments and about $264 million is for the state.

The amnesty drew participation from nearly 11,000 businesses, 78 percent of them small enterprises doing less than $1 million in yearly gross sales, according to state revenue director Suzan DelBene. Seventeen percent were medium-sized businesses; the remaining 5 percent were large ones, she said.

That 5 percent included one large business that agreed to pay tens of millions in back taxes it was contesting, according to DelBene and Gregoire. DelBene said state law prevented her from naming the firm; Gregoire said it decided to settle up rather than take its chances in court.

Collections dwarfed the $24 million originally estimated, Gregoire said. What swelled the state’s take, in part, was the emergence of hundreds of businesses that weren’t even on the state tax rolls.

Revenue staffers estimated there were 428 taxpayers flying off the taxman’s radar that now are on the state’s registry, where they can be monitored for compliance. Those non-payers averaged $50,342 in back taxes totaling $21.5 million for state and local governments.

Republican Sen. Joe Zarelli, a partner with Democratic Sen. Ed Murray in producing a bipartisan Senate spending plan, said the new money solves only a portion of the problems dividing the House and Senate, and that policy changes to reform government are needed, too.

Gregoire said the windfall should help Senate and House budget negotiators settle their differences much sooner in a 30-day special session that began April 26, and she thinks they have no excuse for not finishing on time.

“I’m not interested in a (second) special session. With this information, they can go home,” she said.

Asked about workers’ compensation reforms in Senate Bill 5566, which House Democrats have declined to act on until they get further along on an operating budget deal, Gregoire said, “I don’t think we leave town” without it. “So I’m working on it.”

Brad Shannon: 360-753-1688