Washington lawmakers offer new tax-hike packages

The Legislature's tax negotiations picked up speed Friday, with House and Senate officials offering competing plans to raise roughly $800 million toward closing the state's budget deficit.

A new compromise plan, offered by Gov. Chris Gregoire and backed by House Democratic leaders, was unveiled publicly late Friday night. It is centered on a temporary tax hike for many service businesses, worth about $200 million through June 2011, but doesn't include a sales-tax increase.

"We are really in a big hole, and this is one way for us to work our way out of it," said House Finance Committee Chairman Ross Hunter, D-Medina.

The House's fresh plan competes with a tax blueprint approved earlier Friday by the state Senate, which counts on roughly $224 million from a temporary sales tax increase of two-tenths of one cent.

House Democratic leaders hoped to get support for governor's measure to move the Legislature's special session into final negotiations. But Hunter said one thing appears clear: A sales tax doesn't have momentum.

"We're not going to do a sales tax in the House," he said.

The disagreement over which taxes to raise is at the heart of the Legislature's ongoing special session, which began Monday and will almost certainly stretch into next week.

Majority Democrats in the House and Senate are trying to bridge a $2.8 billion gap in the current two-year state budget, which lasts through June 2011. They've agreed on a target of about $800 million in tax increases as part of that solution but haven't agreed which tax sources should be used.

Both chambers want to shrink tax exemptions, raise some business taxes and increase tobacco taxes. But the Senate has favored a temporary sales-tax hike, while the House has favored a "menu" of targeted tax hikes.

In addition to a slimmed-down sales-tax hike, Friday's updated Senate proposal would exempt real estate agents, scientific research and nonprofit and public hospitals from temporary business-tax increases. A tax on bottled water would be collected sooner than under previous Senate plans, and a "working families" tax rebate for would be delayed until 2012.

"It's a good-faith effort to try and meet the House's concerns," said Senate Democratic Caucus Chairman Ed Murray, D-Seattle. "We know there's some heartburn on the part of some House members about the sales tax, and this is our effort take a significant cut in our proposal."

The updated Senate tax bill, approved Friday by a narrow 25-18 margin, is worth about $718 million. The tobacco taxes are contained in a separate bill, accounting for the remaining $91 million of the Senate package.

The Gregoire plan being promoted by House Democratic leaders combines ideas previously seen from all sides in the tax negotiations.

The temporary business-and-occupation tax increase on service businesses raises the rate from 1.5 percent to 1.75 percent, with hospitals exempt. That's close to a plan originally developed by the Senate.

Roughly $165 million comes from shrinking several tax exemptions, including a sales tax break for nonresidents and a business tax exemption for a bank's first-mortgage sales. The minimum threshold for the bank tax would be $120 million in sales annually.

The plan also extends sales tax to bottled water, and overhauls the way taxes are charged on out-of-state businesses.

House Democrats could vote on the new Gregoire tax plan this weekend. Leaders were trying to generate enough support for it late Friday night.

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On the Net:

Legislature: http://www.leg.wa.gov

Governor: http://www.governor.wa.gov