State House leaders target tax breaks in budget



Updated: April 10, 2013, 9:29 PM


Local angle

The operating budget plan proposed by House Democrats Wednesday would end the sales tax exemption for Oregonians shopping in Washington. But Southwest Washington business leaders say they need that sales tax break to compete with companies in sale-tax-free Oregon.

The same idea was part of the budget proposal Gov. Jay Inslee released late last month. At that time, the Greater Vancouver Chamber of Commerce came out in opposition to ending the sales-tax exemption.

Kelly Parker, the chamber’s president, said Vancouver niche businesses — such as furniture shops and art galleries — get 25 to 40 percent of their business from Oregon shoppers. Those Oregon shoppers could become turned off by having to pay a more than 8 percent sales tax on their purchases in Washington, she said.

“The (chamber) has been consistently supportive of the sales-tax exemption because of the positive impacts it has on local retailers,” she said last month.

Under Washington law, shoppers from other states or Canadian provinces are exempt from paying retail sales tax in Washington if they live somewhere with a sales tax of 3 percent or less. Nearby qualifying states include Oregon, Montana and Alaska.

— Stevie Mathieu

OLYMPIA — Democrats in the state House proposed a budget plan Wednesday that would eliminate a variety of tax breaks to help pay for education and avoid some of the cuts to social services recently approved by the Senate.

Similar to a budget proposed by Gov. Jay Inslee, the plan by House Democrats would increase government spending by more than 10 percent, compared to the Senate plan that increases it by about 7 percent. The two-year budget would spend $34.5 billion, more than $1 billion beyond a plan approved by the Senate.

Under the House proposal, lawmakers would increase K-12 education funding by $1.9 billion, with $1.3 billion dedicated in response to a state Supreme Court ruling that says the state isn’t adequately funding basic education. The Senate plan proposes a $1.5 billion K-12 funding increase, including $1 billion toward the court requirements.

House Majority Leader Pat Sullivan said the Senate proposal simply pushes some education costs to future years.

“We feel that we should actually fund that program right now,” Sullivan said. “You can pay it now or you can pay it later.”

Along with extending businesses and beer taxes to raise nearly $600 million, House Democrats support closing or narrowing 15 tax exemptions on things ranging from repealing preferential business tax rates for travel agents and insurance agents, to repealing the sales tax exemption on janitorial services. The plan would also repeal the sales tax on bottled water, and it would also repeal the sales tax break for residents who live in states that don’t have a sales.

The non-resident sales tax exemption, which has been in place for decades, was designed to help retailers — particularly those along the Oregon border — stay competitive with states that don’t have a sales tax. The Senate plan does not repeal the exemption.

Other exemptions for landline phone service and the estates of married couples are targeted, partly in response to court rulings. Those changes raise $270 million. The budget also relies on $750 million in fund transfers, mostly from the budget stabilization account.

House budget writers avoided some of the Senate’s deep cuts in social services, such as keeping more funding for a childcare program for the working poor. However, they continue assume tuition increases between 3 percent and 5 percent per year.

As the budget passed by the Senate last week did, the House proposal repeals the voter-approved cost-of-living raises for teachers, saving the state more than $320 million. As the Senate did, the House also moves forward with Medicaid expansion under the new federal health care law, with the assumption the move will save the state $265 million.

The House does not try and move some part-time government workers into the federal health care exchange. The Senate plan proposed that shift, booking savings over $120 million.

Lawmakers are nearing the end of a 105-day legislative session that is supposed to end on April 28. In addition to adding more money to basic education, they must patch a projected deficit of more than $1.2 billion for the next two-year budget ending in mid-2015. The House and Senate will have to work out their budget differences before the end of the regular session if they want to avoid going into special session. Democrats have a 55-43 majority in the House.

The Senate is controlled by a coalition of 23 Republicans and two Democrats, though seven other Democrats voted on the budget that passed the chamber last week on a 30-18 vote.