Referendum On Tax Cut Sent To Voters Locke Expected To Veto Separate Measure Cutting B&O; Taxes

The Republican-led Legislature on Wednesday sent voters a broad proposal to cut property taxes, after Gov. Gary Locke vetoed similar legislation last week.

The Legislature also shipped the Democratic governor a big reduction in the state’s main business tax. Locke is expected to veto that measure next week on grounds it may be too expensive now that lawmakers have approved the referendum on a $220 million property tax cut that is widely expected to pass in November.

Locke said he was not inclined to act on the $202 million measure to roll back the business and occupation tax to levels before 1993, at least until he gets a clearer picture of how much revenue will be available for spending, especially for education.

Instead, Locke told a news conference, he will propose passing a B&O tax cut to take effect in July 1998, rather than this July, as is called for in the Senate bill that was passed by the House Wednesday.

Locke’s proposal would halve the measure’s $202 million cost, and make the property tax referendum measure affordable, he said.

Legislative leaders were cool to the idea.

“We’ll just have to wait and see what the governor actually does,” said Senate Ways and Means Chairman Jim West, R-Spokane.

Several lawmakers said Locke’s failure to support a B&O reduction effective this July means he is breaking a campaign promise to cut the tax. But Locke told reporters he had promised only to support the reduction “this biennium,” not necessarily this year.

Some Democrats have said the Republicans deliberately put Locke in a bind with property tax cuts, and the governor could not prudently support the B&O cut this year. The property tax referendum, SB5835, passed the House 60-38. Democrats argued it gives too little relief to homeowners, but Republicans said it would result in significant tax savings in years to come.

A referendum bypasses the governor, going directly to the people for a vote.

Republicans have grown fond of the tactic this session, since they have majorities in both houses but not enough seats in either to override a veto.

The measure would make permanent last year’s 4.7 percent cut in the state’s share of the property tax, worth about $18 annually to the owner of a $100,000 home but much more to owners of higher-priced homes or commercial properties.

Locke went along with a measure to continue the reduction this year, but vetoed a bill to make it permanent. The GOP had voted to send the issue to the ballot, but is repealing that action so the reduction can be combined with another property tax cut.

That proposal would impose new limits on tax rates and assessments, and apply them to all taxing districts with more than 10,000 voters. The legislation would save the owner of a $100,000 home about $35 a year at first, with the value of the reduction growing over the years to several hundred dollars.

Tax-rate increases would be held to the annual rate of inflation, unless two-thirds of a governing board approved a bigger increase.

Such increases could not exceed 6 percent. Currently, tax boards can automatically raise rates as much as 6 percent a year.

The measure also would protect taxpayers against sudden and dramatic increases in the assessed value of their property, allowing them several years to catch up on their tax bill.

The House passed the reduction in the B&O tax by a 91-7 vote. Several Democrats said they voted for it reluctantly, saying it does too little for small business. Republicans said the measure merely returns the levy to pre-1993 levels.

The measure, SB7902, would reduce the B&O levy as it applies to a variety of service businesses, such as architects, lawyers, real estate agencies and engineers. The businesses would see their B&O rates decline .1 percent to .5 percent, down to 1.5 percent of gross receipts.