In honor of tax day, I thought it would be worthwhile to take a look a few tax changes the Legislature adopted this year. Gov. Chris Gregoire floated the idea of a temporary half-cent sales tax as a solution to the budget shortfall last year. That idea failed to gain support, as did another proposal she suggested which would have streamlined B&O taxes, or business and occupation taxes.

Here’s a look at some tax changes that did pass:

Local sales tax collections
This was the $238 million solution that helped break the logjam over the budget. It’s been widely called an “accounting maneuver,” but it basically works like this: The state collects sales tax revenue, which lands in the general fund. A share of that money belongs to local cities, counties and other agencies. Currently, their share is transferred to a separate account every day and then redistributed at the end of the month.

Under the new legislation, the money allotted for local governments will stay in the general fund about a month longer. They will still get their distributions at the usual time, but it gives the state a boost in its monthly cash flow. During floor debate on the issue, lead Democratic budget writer Rep. Ross Hunter said it is a way to “modernize” the way the state manages its money. It easily passed the House and Senate, and is awaiting the Governor’s signature.

Roll-your-own cigarettes
Washington state has the fifth highest cigarette tax in the nation, at $3.025 per pack. That means smokers in the state can expect to pay as much as $9 for a pack of cigarettes at the store, but some have found a way around that by using roll-your-own cigarette machines. Customers buy the tobacco and papers, then put it in a roll-your-own cigarette machine found in 65 stores statewide. In about 10 to 20 minutes, they’ve got rolled cigarettes for half the price.

New legislation expands the definition of cigarettes to include roll-your-own, and they will be taxed at the same rate as prepackaged cigarettes starting July 1st. The bill drew heavily debate in the Legislature, but ultimately passed. Opponents said it would put stores out of business and devastate small business owners, who paid about $30,000 apiece for the roll-your-own machines. Supporters say it will deter smoking, which improves public health while also bringing in an estimated $12 million in new revenue – a number that could change depending on how consumers react.

Eliminate tax deduction for big banks
Washington state doesn’t charge taxes on the interest that banks earn on loans for first mortgages. The Legislature voted to end that tax deduction starting July 1st for big banks that operate in more than 10 states. The change is expected to bring in about $15 million a year.

New tax breaks
While banks lost a tax deduction, other businesses got new or extended tax breaks. In an effort to attract more film and TV production companies to the state, the Legislature revived the Motion Picture Competitiveness Program, which expired last July. It gives filmmakers a 30 percent rebate off the money they spend in the state on hiring local crews and other expenses.

Also, craft distilleries that make and bottle their own spirits will get an exemption from paying a retail license fee of 17 percent on bottles they sell in tasting rooms. Businesses that operate processing facilities for fruits, vegetables, dairy and seafood will get an extension of a B&O tax exemption until 2015.

Tags: taxes

The bill to add the state cigarette tax to “roll your own” cigarettes is getting a vote in the House now. Watch live on TVW.

Rep. Cary Condotta said the bill will close 65 to 70 businesses across the state. “There is no question here what they’re doing,” he said, for only about a million dollars in revenue. “No thank you, Mr. Speaker. Not for me.”

But Rep. Chris Hurst, a Democrat from Enumclaw, said the bill will protect jobs — not take them away. He said RYO businesses often advertise cigarettes at half price and that puts all the other businesses around them at risk. “They’re right on the margins right now, Mr. Speaker. They’re barely getting by. These grocery stores legally sell tobacco and that’s a big part of their business,” he said.

Rep. Matt Shea asked how many votes the bill would take to pass, since it increases revenue to the state. Rep. Jim Moeller, acting speaker, said that since roll-your-own cigarettes are already included in the definition of cigarettes under state law, there was no need for a two-thirds vote.

The bill passed 67 to 30 and now heads to the Senate.

Tags: House, Roll your own cigarettes, taxes

This week: Senate Democrat Leader Lisa Brown and House Republican Leader Richard DeBolt share their views on the state budget, possible tax hikes, and other key issues facing the 2012 State Legislature. Enjoy.

Tags: Budget, House, Inside Olympia, Reform, Senate, taxes

Sen. Joe Zarelli delivered the Republican response to Gov. Chris Gregoire’s State of the State address. You can watch it all here:

He started off by saying that he agrees with the governor on one point: The budget is the most important issue this session. But he disagrees on how to solve the $1.5 billion budget gap. He said temporary solutions — like the proposed half-cent sales tax increase — are not the way to go.

“We can go for a short-term fix that is based on new – and in some cases, temporary – revenue. Or we can seize opportunities that will help make state government more efficient, cost-effective and sustainable now and for years to come.”

Tags: Republican, state of the state, taxes

House and Senate budget writers are close to a compromise on several hundred million dollars in cuts, according to Senate Majority Leader Lisa Brown. Brown held a press availability this morning.

She said that budget writers are neither ready to adopt Gov. Chris Gregoire’s full package of cuts to bridge the $2 billion spending gap in the budget nor to pass a tax package. But, she said, after hearing from hundreds of citizens on the proposed cuts and negotiating, she’s optimistic that a package of cuts will be announced on Monday.

Brown did not provide details on the cuts: She said she’d leave that to budget negotiators, including sens. Ed Murray and Joe Zarelli.

“We still have a long way to go after that’s over,” she said, referring to more than a billion more in cuts — and possibly a tax package — that would need to be handled during regular session, which starts in January.

Lawmakers are also planning to pass a resolution urging Congress to pass the Marketplace Fairness Act, which would require internet retailers to collect sales tax on their sales. The bill could net the state $400 million in additional revenue if passed, Brown said.

Tags: Budget, Legislature, special session, taxes

On tonight’s edition of The Impact, I talk with Gov. Chris Gregoire about her tax proposal, the state budget, special session, her thoughts on the Occupy protests at the capitol – and much more. We didn’t have time to air the entire interview on the show, so I’m posting the full, unedited version here.

But don’t miss tonigh’ts show: We’ve also got more on the protests, an on-set interview and news from the first week of this 30-day special session. You can watch at 7 and 10 p.m. on TVW.

Tags: Budget, Gov. Chris Gregoire, Governor, Occupy, protests, taxes, The Impact

Gov. Chris Gregoire’s budget is up for hearing in the House Ways and Means Committee. Rep. Ross Hunter said there are about 160 people signed up to testify — each will get 2 minutes to give their perspective on the cuts proposed last week. I’ll be updating this post with some of the testimony, so stay tuned.

First up, Ingrid McDonald with the AARP. “More than 1,000 people in our state will lose their home care,” she said. “The only solution is revenue. We commend the governor,” for coming up with the half cent sales tax plan to save some services from further cuts, she said.

Lynn Treat said she and her husband are both disabled and have lost their jobs — and with those, their insurance. “We may not be able to afford long-term care or any of the aging services,” she said. “We should be looking at maximizing revenues,” she said, even through a “marginal” sales tax increase like the governor has proposed.

Jen Estroff with Childrens Alliance asked legislators to raise revenue. “Do whatever it takes,” she said. “This is a moment of choice, not just for our state’s budget but for our children’s future,” she said.

Update at 8 p.m.: The Ways and Means Committee continues — you can watch live on TVW. And The Associated Press is reporting that hundreds of protesters are camped out in the capitol building, where the state police have locked the doors to prevent more people from coming in.

Tags: Budget, cuts, taxes, ways and means

So far, every initiative is passing — except Tim Eyman’s initiative 1125, which is behind by about 2 points right now.

There will be more batches of returns in the coming days and more updates, but for tonight it looks like the state will have privatized liquor stores, more training for home healthcare workers, a budget stabilization account and no residency requirement to vote for president.

Tags: initiatives, liquor, referendum, taxes, tolls

Last Q&A, I spoke with Sen. Ed Murray, Democrat and head of the budget writing committee, about the budget and his support for taxes. This week, I spoke with Sen. Joe Zarelli, the Republican who takes the lead on budget issues in the Senate, about the same. Here’s what he had to say.

Q: The magnitude of the budget crisis is hard to comprehend. Do you have any way to characterize it that might help people understand what you’re dealing with as legislators?

Zarelli: Generally, when you make reductions in government spending it’s those who obviously are dependent on government spending that feel the reduction. So it’s hard to express. For those people, obviously it’s a very real scenario. For us, regardless of the fact that one could say we actually have more money projected for this biennium than last biennium, that’s only because we went from a very high projected revenue to a very low projected revenue.

It gets harder as you make those reductions, it’s no different than people sitting around their kitchen table. It gets harder every time as you have to make more cuts. For us, the faces (of those affected by the cuts) are real.

Q: Is there a way to get to the $2 billion in reductions simply through cuts? Or would that be going too far?

Zarelli: Well, I don’t think we have much of an option. To generally raise taxes – the desire of some – I’m more of the mind that we have to make cuts first of all and if someone wants to generally look at the idea of taxes, then they’ll have to take it to the public. And that’s going to be a real hard sell because the basis for our declining revenue is based on the inability of consumers to spend money because they don’t have money. To generally raise the price of goods through taxes, I don’’t know how that helps us get out of our funk.

The answer is, how do we get people working so that people can take care of themselves and not have as great a need for the government. So to me, we should focus rather on the folks and how do we get them employed and make it so that the private sector can create employment strategies.

Q: What are your thoughts on eliminating tax exemptions? There’s been some talk of getting rid of a tax exemption that doesn’t demonstrably boost the economy.

Zarelli: Yeah, I think that’s our job (more…)

Tags: Budget, Q&A, taxes, Zarelli

This week’s Q&A is with Sen. Ed Murray, the Seattle Democrat who chairs the Senate budget writing committee. Murray talked about the budget hearing earlier this week, where lawmakers got a sense of the cuts agencies are proposing. We also talked about taxes, same-sex marriage and more. Next week, I’ll speak with a Republican budget writer about the impending cuts.

Q: Earlier this week, you heard some of the plans from state agencies for cutting 10 percent of their budgets. What are some of the elements that stood out the most?
Murray: Well, we have reached the point of — the cuts we’ve already made are fairly severe. But now we’re moving to the point of eliminating some pretty basic services that people depend on because they’re ill, because they’re disabled or because they’re old. So there are no sort of halfway measures left. This leaves only draconian choices.

Q: Are there any potential cuts you heard about that were particularly troubling?
Murray: You worry about some of the decisions we would make around the mentally ill. There are so many that stand out it’s hard just to pick one.
We’re looking at basic health care coverage, those sorts of things, assistance to immigrants, things like language interpreters for medical procedures. That pretty much cuts off the ability to someone to treat or someone who needs treatment.
Q: There has been talk about taxes. After what you heard earlier this week, are you convinced of the need of a revenue package?
Murray: I personally think we need to put revenue on the ballot and give voters a choice, but I don’t know if the votes are there in the Senate.

Q: Is that something you’re working on — getting support lined up for a potential package?
Murray: It certainly will be. To some extent, unless you’re actually in session it’s difficult to work some of these issues.

Q: At the hearing this week, you heard about the proposals to cut 10 percent — and yet, for many agencies, those cuts still don’t get you to $2 billion. How do you characterize the magnitude of this problem?
Murray: You know, it’s hard. When you ask voters, Should we have the services that state government provides like school, college, hep for families who have someone in their family who is disabled? They support it. (more…)

Tags: Budget, cuts, Sen. Ed Murray, special session, taxes