State Senate drops sales-tax proposal, majority leader says

OLYMPIA — After nearly three months of arguing, lawmakers may be close to a deal on an $800 million tax package that does not include a general sales-tax increase.

The state Senate's decision Wednesday to drop its proposed sales-tax hike is key to the apparent breakthrough.

"We've done a lot of back and forth and give and take during the whole process, but the sales tax was always sitting there in the way," said House Majority Leader Lynn Kessler, D-Hoquiam.

The House and Senate had been at odds over whether to increase general sales taxes to help close a $2.8 billion budget shortfall through June 2011. Senate Democrats supported a temporary increase. House Democrats did not.

Democrats control both chambers.

Both sides now are discussing a single proposal that includes new taxes on beer, soda pop, candy, gum, cigarettes and bottle water, along with a business-tax surcharge on service business.

State Senate Majority Leader Lisa Brown confirmed a sales-tax increase no longer was part of the discussion.

Sen. Ed Murray, D-Seattle, the Senate's lead tax negotiator, said he was fine with dropping the sales tax. "I wasn't ideological about it. It's about what works," he said. "I think that's true of both Lisa and I."

Although a deal may be close, it's not certain.

Brown, who had been counting votes all day Wednesday, said, "We're close, and it looks good."

House Democrats said they still had to talk to a lot of members.

Time to compromise

Gov. Chris Gregoire, also a Democrat, said earlier Wednesday that it was time for lawmakers to compromise.

Her message to them: "I'm not asking that you love it. I'm asking that you pass it, so we can get out of town."

The exact amount of taxes involved are still in flux, but details of the package being discussed emerged Thursday morning.

The biggest chunk was a temporary tax increase for service businesses that would bring in about $245 million. Taxes on cigarettes, bottled water, soda, candy and gum and mass-produced beer would add nearly $262 million. The beer and soda taxes would also be temporary, ending in June 2013.

Tax on bottled water

Gregoire called a 30-day special legislation session, starting March 15, after lawmakers failed to reach a budget deal during the 60-day regular session. The special session has cost more than $175,000.

The sales tax has been an issue from the beginning.

Senate Democrats first proposed a temporary three-tenths of a cent increase as part of a broader tax package during the regular session.

They dropped the bump to a two-tenths of a cent last month, then to one-tenth of a cent Monday. But the House refused to go along.

Gregoire has said she doesn't want a sales-tax increase for fear it could hurt economic recovery.

If an agreement is reached on taxes quickly, legislative leaders said, they can wrap up business by the last day of the special session on Tuesday.

Lawmakers already have agreed to make several hundred million dollars in budget cuts and to raise about $800 million through June 2011 by increasing taxes and eliminating tax exemptions.

They also have agreed to use one-time fixes such as federal aid and reserves to help bridge the rest of the budget shortfall.

The Associated Press contributed to this story.

Andrew Garber: 360-236-8266 or agarber@seattletimes.com