In Our View: Keep Sales Tax Exemption

Suggestion in Inslee's proposed budget would hurt businesses in Clark County



Gov. Jay Inslee wants to end the sales-tax exemption for Oregon shoppers in our state. We assumed the governor thought more highly of Clark County than that.Exempting Oregon shoppers from state sales taxes is one of the few arrows in the quiver of Clark County merchants as they struggle against sales-tax-free competitors across the Columbia River. There’s no telling how much business would be lost in our community if Oregonians were burdened with a sales tax that doesn’t exist in their own state. That brutal business reality seems to have escaped the new governor, whose proposed budget (announced Thursday) would end the 48-year-old nonresident sales tax exemption.

It’s a good thing this new revenue generator — from a governor who campaigned on a no-new-taxes platform — is only a proposal. We suspect it will be shot down in the House, where a bill with a similar intent died last year.

There are plenty of arguable topics in the governor’s proposed biennial (2013-2015) budget. Not the least is an 11 percent increase over the previous budget in state spending. According to the Washington Policy Center, Inslee proposes spending $34.4 billion over the biennium, a 10.9 percent boost from $31 billion in 2011-13. The WPC also reports this would be the second-largest increase since the 2001-03 biennium, second only to an 18 percent increase in pre-recession 2005-07. The other four budget increases have been in single digits.

Ending the nonresident exemption on sales tax is not the only new revenue source that Inslee is proposing. He will be quick to point out that — technically — it is the ending of a tax loophole and not — technically — a tax increase. For the Oregon shopper, though, it sure would look like a new tax.

The rejection of such a notion last year in the House was thanks largely to opposition by five local state representatives: Republicans Ann Rivers (since elected to the state Senate), Paul Harris and Ed Orcutt, plus Democrats Tim Probst (succeeded by Monica Stonier) and Sharon Wylie. Local politicians who have advocated removing the sales-tax exemption include Democrats Jim Moeller and former state representative Deb Wallace.

The proposal announced by Inslee on Thursday contains two troubling passages. First, it estimates that as much as $72 million could be gained by Washington in a biennium if Oregonians are forced to pay sales tax. But as we’ve pointed out before, that estimate is squishy at best, because there’s no way of knowing how much of the current business from Oregon shoppers would be suppressed by the imposition of a new sales tax.

Second, there is the claim in Inslee’s proposal: “No other state has seen the need to provide similar preferential treatment to nonresidents.” The whole truth, however, is that only four other states (Alaska, Delaware, Montana and New Hampshire) fall into this category with Oregon. And all four states rank 42nd or below in population. None presents anywhere near the potential customer base of Oregon, which ranks 27th in statewide population.

In an editorial last year, we quoted Kelly Parker, president of the Greater Vancouver Chamber of Commerce: “Sales tax exemption is not the problem, and removing it is not the solution … The sales tax exemption is a sales tool for local businesses.” Parker is correct.

Moeller, too, is correct when he says there is support in our community for charging sales tax to Oregonians. But a closer examination reveals that the potential damage to local businesses, many struggling just to stay open, makes this a bad idea.