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Gov. Inslee says a longer life for temporary taxes on businesses, beer do not violate his no-tax pledge

Post by Brad Shannon / The Olympian on Jan. 17, 2013 at 3:18 pm |
January 17, 2013 3:37 pm

About 24 hours into his new job, Gov. Jay Inslee told reporters today that it would not violate his no-new-taxes pledge if the Legislature chose to extend the 3-year life of temporary taxes on service businesses and beer beyond their June expiration. The new governor’s remarks are sure to stir controversy even though he said several times he was not actually advocating a longer life to tax surcharges on service businesses and beer beyond June 30.

At least he isn’t proposing anything as yet.

What he said when first asked about temporary taxes was:

“So I favor a good budget that we eventually will have that will be balanced, that will move forward to the extent humanly possible on school funding and will not increase taxes as much as humanly possible.”

He added:

“I do not believe we would be increasing taxes if we extend the existing tax rates in that regard. And the reason I believe that is it’s true. We would not be increasing taxes for consumers in that regard. … So I don’t want to foreclose the possibility of those being on the table for discussion. I’m not proposing it right now. I think it is something that people ultimately are probably going to consider.”

Republican lawmakers speaking after Inslee’s inaugural speech a day ago said they will try to hold the line against higher taxes, and until the Supreme Court rules otherwise tax advocates would need a two-thirds super-majority to pass a tax hike.

The biggest hurdle to taxes is in the Senate where the 23 Republicans have joined two Democrats in a Majority Coalition Caucus.

“My first priority is to help the governor keep his (no tax) pledge,” Senate Republican Leader Mark Schoesler of Ritzville said. “We believe temporary really meant temporary on those taxes.”

The Department of Revenue says that extending a 0.3 percent surcharge on the gross receipts of service businesses would bring in $534 million over the next two years, and the beer tax would bring in another $101 million. The Legislature faces a nearly $1 billion shortfall to keep delivering programs written into current law, and some lawmakers say $1.3 billion to $1.4 billion more is needed to answer the state Supreme Court’s ruling on under-funded schools in the McCleary case.

Schoesler said he has talked to people in his community such as an accountant and barber who understood the taxes on service businesses were temporary. “They are pillars of our community and they are being punished,” he said.

House Republican Leader Richard DeBolt of Chehalis has taken a similar tack. But House Appropriations chairman Ross Hunter, D-Medina, has said he thinks an extension of taxes is different than enacting new ones.

Business groups are worried, however, that the taxes could go up on their members.

Inslee was asked later what he’d say to those who saw his comments as breaking his no-tax campaign pledge. He said he has not made a decision on the taxes. He also indicated his comments were in the context of whether “we in the fullness of time decide or conclude they are necessary for satisfying the McCleary decision or having a balanced budget” that he was offering his comments.

“But should the Legislature reach that conclusion and I eventually agree with it, what I’m going to do is tell the truth, which is that these do not raise taxes. They do not raise taxes on people over the existing level that, in fact, are being paid today. And since they do not increase taxes they are not a tax increase. That is a numerical, mathematical conclusion that Huskies and Cougars, no matter where you went to school, can agree with on a mathematical basis.”

The surcharge on service businesses added 0.3 percent to a 1.5 percent tax rate on a business’ gross receipts.

Inslee seemed to enjoy his time talking print, online and television reporters in the first news conference after being sworn in and he revisited some of the green-jobs themes he spoke about in his inaugural address, and he talked about coal export terminals at Washington ports as the biggest carbon-pollution decision in his lifetime.

He also shed more light in several areas, calling ongoing problems Boeing is having with its 787 jets a “very surmountable problem.”

On gun control, he said he wants to encourage people to listen to each other, avoid the extremes and find a consensus on something that can pass and meet a “common sense” test. Inslee said the size of ammo clips is the issue with assault rifles more than the “cosmetics” of a particular assault rifle design, and he thinks no one needs a 30-bullet clip for hunting or to protect a home.

It seemed, however, that he mostly wanted to talk about climate change – and mentioned off the bat that his first act as governor was to send a letter to a “cutting edge, clean energy” company that is thinking of moving its headquarters and manufacturing to Washington. Inslee declined to identify the firm, but he implied it is a possibility, saying he was very excited about the prospect so early in his administration.

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