Tax-Cut Frenzy Hits Session Lawmakers Bursting With Tax-Break Ideas To Divvy Up $500 Million Surplus Left From 1993-95 Budget

FOR THE RECORD CORRECTION: State Rep. Lisa Brown of Spokane is a Democrat. Her party affiliation was incorrect in two stories in Thursday’s paper. Correction published on March 3, 1995.

Wrestling with a fiscal crisis, state lawmakers two years ago raised taxes and fees more than $1 billion.

Now, they’re elbowing each other aside in a rush to give back money in tax breaks.

The reasons: a $500 million surplus left from the 1993-95 budget, and the spending limits imposed by Initiative 601, which won’t allow them to use that extra money on state services.

Lawmakers from both parties want to divvy up this politically-savory tax cut pie. They just disagree over its size and who should get the biggest slices.

Many want to roll back taxes that they say make Washington a poor place to do business. Others argue that consumers and homeowners deserve a break on sales and property taxes.

More than 200 tax cut proposals were introduced this session, totalling roughly $5 billion or $6 billion.

“I don’t think you’ve ever seen so many tax cut proposals adding up to so much money,” said Mike Gowrylow, spokesman for the state Department of Revenue.

Fueling the tax cut frenzy is the estimated $500 million surplus due to a better than expected tax collections. Initiative 601 requires the state to deposit extra revenue in a rainy day fund, but lawmakers believe there is plenty left for tax cuts.

The smell of tax breaks is attracting nearly every special interest group in the state - from Weyerhauser and Boeing to small businesses to state colleges. Their lobbyists roam the halls of the Capitol and ply legislators at pricey receptions to win support for their favorite tax cut.

“Since tax cut fever is running rampant, everyone who ever had an idea for a tax cut is out there with an oar in the water,” Gowrylow said.

Some proposals are sweeping, such as the nearly $3 billion in sales and business and occupation tax exemptions for businesses offered by Rep. Scott Smith, R-Graham.

Other cuts are aimed at specific interest groups.

Rep. Steve Van Luven, R-Bellevue, wants to exempt universities from the sales tax, at a cost of $79 million. Rep. Dawn Mason, D-Seattle, proposes sales tax exemptions for diapers and feminine hygiene products, totaling $39 million. Other bills offer tax cuts for vitamins, horse racing, shellfish and blood banks.

Most proposals will not make it out of committee.

One idea drawing bipartisan praise is Gov. Mike Lowry’s $147 million sales tax exemption for equipment purchases by manufacturers. His $223 million tax cut proposal also would give credits to businesses that donate to college student financial aid programs or hire and train welfare recipients.

Lowry hopes his manufacturing tax break will make Washington more attractive to large manufacturers and create 45,000 new jobs over the next nine years.

House Republicans include the $147 million manufacturing tax break in their $420 million tax cut package. They also propose a partial rollback of 1993’s unpopular business and occupation tax increase and a property tax reduction amounting to $19 a year for a $100,000 home.

Democrats argue that the GOP won’t be able to find enough slack in the budget to pay for their tax cuts.

The $500 million surplus is only for this biennium, said Sen. Nita Rinehart, D-Seattle, chairwoman of the Senate Ways and Means Committee. The state may need that money in years to come, especially if the economy sours because of Boeing layoffs.

“It’s like using a Christmas bonus to buy a house,” Rinehart said. The state could make a down payment on big tax cuts with its $500 million bonus, but the money for future payments will have to come from somewhere else, she said.

That’s not a problem, say Republican leaders. “We know we can find it,” said Rep. Brian Thomas, R-Renton, chairman of the House Finance Committee. “I have been very insistent that when we cut taxes, we have long-term spending cuts to go with them.”

House Republicans won’t detail those cuts until they unveil their state budget proposal in mid-March.

Cutting waste in state government sounds good, but it hurts, said Gowrylow.

“It gets pretty painful pretty fast when you start cutting the budget,” he said. “They’re already screaming bloody murder over at the colleges.”

Another issue is who should benefit from the tax cuts. Small business lobbyists say the 1993 B&O tax hike should be the first to go.

“It doesn’t take a rocket scientist to figure out that tax increase wasn’t needed,” said Tom McCabe, a lobbyist for the Building Industry Association. McCabe said some of his members’ taxes jumped by 60 percent.

McCabe and others also want to make sure large corporations don’t get preferential treatment.

“You don’t want to see one business get a tax break and all the others suffer,” said Carolyn Logue, a lobbyist for the National Federation of Independent Business.

Rep. Lisa Brown, R-Spokane, criti cized GOP tax breaks for offering only token gestures to the average family. She sponsored measures to lower the state sales tax and to target property tax relief to low and middleincome homeowners.

ILLUSTRATION: Graphic: Cutting taxes