Washington state loses revenue as lawmakers fail to resolve tax dispute

OLYMPIA — The Legislature has been in session so long it's losing millions of dollars from potential taxes that could have started April 1 to help close a $2.8 billion budget shortfall.

The state Department of Revenue estimates the state is forgoing up to $15 million in tax revenue that would have been collected next month had the latest House tax package become law by now.

Those figures do not include a proposed two-tenths of a cent increase in the state sales tax under the Senate plan. That tax would kick in later in the year, if it's ever approved.

The Department of Revenue said lawmakers would have had to approve the new taxes by Tuesday to start collections April 1, the start date for several taxes in the House plan.

It would be an accounting headache for businesses to begin a new tax in the middle of the month, the Department of Revenue said, so now the earliest new taxes could start would be May 1.

In addition to forgoing tax revenue, the House and Senate so far have spent more than $150,000 for a special legislative session that started March 15 but has not yet resulted in a deal on taxes.

When the special session started, lawmakers said they hoped to wrap up business within a week.

Now, there's increasing talk that most of the Legislature should just go home until a deal is reached by majority Democratic leaders.

"I don't think they ought to be here if they aren't getting work done," Gov. Chris Gregoire said on Tuesday. "They should stay home until we get a resolution of this."

The Senate still wants a temporary general sales-tax increase to help fill the budget shortfall; the House proposes increasing some business taxes and changing some tax exemptions — but no general sales-tax increase.

Rep. Jeff Morris, D-Mount Vernon, said he's urging House Democratic leaders to adjourn if a deal isn't concluded by Sunday. "I'd rather send our members home, save the tax money and have people work out whatever that compromise is going to be. And then bring people back," he said.

House Majority Leader Lynn Kessler, D-Hoquiam, said that option was being considered. Sen. Ed Murray, D-Seattle, chairman of the Senate Democratic caucus, said lawmakers should stay in town and focus on working out a deal.

As it is, the House and Senate took off Tuesday and will take off Wednesday as well, while negotiators continue to meet.

If a deal is reached on taxes, negotiators predict they can finish the rest of the budget quickly.

Both the House and Senate have agreed to raise roughly $800 million through taxes to help close the shortfall.

There's also broad agreement to make several hundred million dollars in cuts and to use one-time fixes such as federal aid and reserves to help bridge the gap.

Andrew Garber: agarber@seattletimes.com or 360-236-8268