Washington State: Proposed House Democrat Tax Increases

The House Democrats have proposed the following tax increases:

.2 Sales Tax increase -- $350.4 Million Tax Increase
. Would move the state rate from 6.5% to 6.7% .
. Would make the combined state a local rate go from 8.9% to 9.1%
. Washington would have the 5th highest combined rate in the nation.
. If you include the sales tax on lodging, the rate in Seattle will go
from 15.8% to 16%.
. This tax increase hits border counties especially hard, making our
state even less competitive with its neighbors.
. The Democrats always call the sales tax regressive - so why are they
making it more regressive?

5 Minute Keno -- $28.7 Million in Gambling Expansion
. Expands gambling by allowing people to play Keno every 5 minutes.

Increase Cigarette Tax by 50 cents a pack -- $81.3 Million Tax Increase
. Tax would go from $1.425 to $1.925 per pack.
. Washington would have the highest cigarette tax in the nation (DOR,
Nov. 2002).
. Cigarette taxes are extremely regressive, making the poor the
biggest losers under this tax.
. A person who smokes a pack of cigarettes a day will pay $183 dollars
more a year in taxes.

5% add-on retail sales tax on spirits -- $77.2 Million Tax Increase
. This will have a very negative impact on restaurants and stores.
. It is also a regressive tax that disproportionately affects
low-income people.

Impose penalties on underpayment of taxes -- $46 Million in penalties
. Under current law, businesses have a 30-day grace period to make up
any underpaid taxes sent to the Department of Revenue.
. This will eliminate the grace period and impose an immediate penalty
on a business for underpayment, even if it was just a mistake.
. Penalties will start at 5% but quickly reach 20%.
. These penalties are more severe than penalties imposed by the IRS
for late payments.

Eliminate sales tax exemption for candy and gum --$31.1 Million Tax Increase
. Candy and gum is currently exempt from the sales tax as a food
product.
. This proposal will tax candy and gum at the new state rate of 6.7%
plus local sales tax.
. This will adversely impact mom-and-pop stores as well as other
retailers.
. Kids will feel the impact of this tax increase.

Repeal B&O tax exemptions for cash discount payments -- $23.7 Million Tax Increase
. Requires businesses to pay B&O tax based on the amount billed, not
on the amount received.
. Now, if a company sends a bill to a person who has an account with
them, the company may offer them a discount if they pay their bill by a
designated time. If the person pays the cash, the company currently pays
tax on the amount received. Under this proposal, the company would have to
pay on the amount billed.
. This would cause companies to stop offering discounts for cash
payments or reducing the discount price to make up for the increased tax.
. Consumers and businesses are both losers.
. Building supply businesses are one of the biggest losers as they use
this discount payment method frequently. This could result in less
affordable housing.

Limit "dues and fees" deduction to associations -- $2 Million Tax Increase
. This would limit (eliminate?) the deductions people can make for
dues paid for services from clubs such as fitness centers.
. Retains the deduction for dues paid to associations like the WEA and
other unions.

Sales tax payment period -- $6.55 Million Tax Increase
. Moves up the quarterly tax payment from the 25th to the 20th of the
month.
. This was also assumed in the Senate Republican budget.

Sales tax Streamlining -- $6.1 Million Tax Increase
. This is a tax on our kids' juice boxes. If there is less than 50%
real fruit juice in a product, it will now be taxed.
. This tax on juice boxes is in the Streamlined Sales Tax bills (HB
1863 & SB 5783), which are both in House Rules. However, their budget
assumes more money by pushing forward the implementation date for the juice
box tax increase to July 1 of this year from July 1 of 2004.

Other Tax Increases
. Excise tax interest -- $610,000 Tax Increase (HB 1591)
. Tire recycling --$130,000 Tax Increase (HB 1705)
. Delinquent insurer/taxpayer -- $40,000 Tax Increase (HB 2040)

Total Tax Increase Legislation (Net): $653 Million

Failure to extend job-creating tax exemptions $116 Million Tax Increase
. The House Democrat Budget fails to renew expiring tax incentives for
research & development, high tech industries, and other job creating
activities.
. This Senate budget preserves all these job-creating tax incentives.

Total Tax Increase Package: $769 Million