Gop’s Tax Cuts Benefit Business Most The 41 Separate Reductions Will Be Little Felt By The Average Taxpayer, Either At Home Or At Work
In classic Republican fashion, the 1997 Legislature cut taxes with abandon - $411.7 million worth over the next two years - mostly to benefit business.
In classic Democratic fashion, the minority in both houses fought most of the cuts, contending either that they were too much too fast, or that they were the wrong reductions.
“We came in with a plan to cut taxes substantially, and we did it,” House Speaker Clyde Ballard, R-East Wenatchee, said. “We were very serious about reducing taxes. If you reduce taxes, you reduce revenue and you reduce growth of government in the future.”
“It was a big giveaway to big business,” said Democratic Rep. Hans Dunshee of Snohomish.
While both sides suggested the tax cuts would have a big impact, the 41 separate reductions will be little felt by the average taxpayer, either at home or at work.
Moreover, much overlooked amid the fierce partisan debate, (some of it calculated to show up on campaign brochures), was the simple fact that cutting taxes this year was painless.
Limited by spending cap Initiative 601, the state can’t spend hundreds of millions of dollars of revenue pouring into the treasury. It can sit on the dough or give it back. The voter-approved cap limits spending increases to the rate of inflation and population growth.
Even after choosing to put aside a $362 million reserve to rescue the $19 billion two-year budget should there be a sudden change in fortune, the Legislature found itself in the enviable position of being able to part with more than $411 million in tax reductions.
Among the bigger cuts:
A reduction in property taxes valued at $194.5 million over the next two years. The cuts will kick in with expected voter passage in November. Gov. Gary Locke vetoed the package, forcing lawmakers to send it to voters. Locke and fellow Democrats contended that the proposal does too little for the average homeowner. The package makes permanent an existing reduction worth about $18 a year to the owner of a $110,000 house, and adds another reduction worth about $35 a year to the owner of the same house. Democrats wanted a constitutional amendment allowing the state to cut each homeowners’ taxes by $205.
A business and occupation tax reduction for service businesses worth about $95 million a year. Everybody loved this reduction, and it was signed into law by Locke. But it won’t be especially felt by small business. “I think it’s probably worth a few hundred dollars a year to me,” said Shawn Newman, an Olympia attorney with a solo practice. The Democrats often liked to point out that 70 percent of the reduction will go to the top 15 percent of Washington’s businesses.
A new exemption on all business property intangibles, such as trademarks and franchise agreements. Nobody knows how much this will cost the state treasury. Backers said it will be very little because those items are little taxed now. Foes said it could be multimillions of dollars over the next several years, a property tax burden that would be shifted to homeowners. Locke signed the exemption but promised to watch closely to make sure it didn’t become a major drain on local government treasuries.
Tax breaks for the Centralia Steam Plant to keep the Lewis County plant and an adjacent coal mine in business. The cost to the state will be $130 million over three decades, with $6.6 million in the coming two-year budget cycle, an estimated $27.57 million in the following biennium and increasing amounts over the following 26 years. The measure, which had bipartisan support, was sold as a way to save 670 jobs. Locke is expected to the sign it next week.
Locke is still to act on more than three dozen additional tax cuts, miscellaneous reductions that revenue committee chairmen called their “cats and dogs.”
They include at least one Locke is likely to veto - a $7.7 million reduction in the soda pop tax. The tax was approved by voters in 1994 to help pay for programs to reduce violence.
Another that faces uncertain prospects with Locke is a $9.2 million cut in the tax on beer, and a $1.1 million tax reduction for coinoperated car washes.