Fatigued lawmakers round up final budget votes

OLYMPIA — State lawmakers say they're only a few votes away from a deal to raise $800 million by taxing candy, gum, beer and soda pop, as well as boosting other taxes.

House Majority Leader Lynn Kessler, D-Hoquiam, said she'd been calling lawmakers all day Thursday and her caucus only needs a handful more votes.

"I'm very optimistic," she said. "One I talked to today won't say definitively he's a yes, but he probably will be. He told me he just feels like he wants to get together with us and talk about stuff."

Sen. Ed Murray, D-Seattle, chairman of the Senate Democratic caucus, said his chamber is close as well. "We're not there, but I think we're going to get there," he said.

The statehouse has been largely empty for the past week, with the exception of lobbyists and a handful of negotiators trying to reach an agreement. Lawmakers in the House and Senate are expected to return on Saturday and Democratic leaders said they expect to wrap up business by the time the 30-day special session ends on Tuesday.

Lawmakers have been tussling for nearly three months over what kinds of taxes to raise to help close a $2.8 billion budget shortfall through June 2011. They've already outlined hundreds of millions in cuts to help bridge the budget gap.

Any budget agreement announced by lawmakers will still have to survive a gauntlet of lobbyists opposing the tax package.

Opponents of a proposed tax that would add 2 cents to a 12-ounce can of soda, for example, are running radio ads on more than two dozen stations across the state.

"The governor says it's just a couple of pennies more for a soft drink," the ad says in part. "She shouldn't nickel-and-dime us with higher costs at the grocery store. That's just not right. Not now."

Tim Martin, president of the Washington Beverage Association, wouldn't rule out a referendum campaign to challenge such a tax.

"Considering the magnitude of this type of excise tax on our industry, we're going to entertain any and all possibilities, as far as trying to defeat it,"

Rep. Hans Dunshee, D-Snohomish, said lobbyists opposed to the tax package "are all over the place."

He predicted "it will be touch-and-go" over the next few days. "We'll just sit there until we get the votes, or not."

Several forces have combined to push lawmakers toward a deal. The logjam appeared to weaken earlier this week when the state Senate backed off its proposal for a temporary increase in the state sales tax. Both House Democrats and the governor said they did not support a general sales-tax increase.

Fatigue is also a factor, Kessler said, noting lawmakers want to go home.

Sources close to the negotiations have leaked details of the tax package currently being considered.

The proposals are still being tweaked and may change, but it appears that the bulk of the money would come from a handful of taxes.

A business-and-occupation tax surcharge would raise the single largest amount of money, about $246 million through June 2011. It would increase from 1.5 percent to 1.8 percent the B&O tax paid by service businesses, with exemptions for hospitals and research and development. A tax credit for small businesses would be doubled.

Another proposal would deal with a state Supreme Court ruling that has the potential to cost the state hundreds of millions in lost tax collections.

The ruling broadened an existing tax exemption for out-of-state companies that sell their products through door-to-door sales representatives, such as Avon.

The court decision extended the exemption to out-of-state companies selling products in retail stores, reducing tax collections. The Legislature is proposing to re-establish the tax, which would bring in an estimated $155 million.

The package also included taxes on the portion of business some out-of-state companies do in Washington state. The tax would mainly hit banks and credit-card firms, raising $82 million.

Other taxes on beer, soda pop, candy, bottled water and tobacco products would bring in more than $260 million combined.

The beer tax is the newest proposal to be considered. It would apply to large companies producing more than 60,000 barrels a year, and increase the tax by 50 cents per gallon, or 28.1 cents per six pack. Microbreweries would continue to pay the rate of $4.782 per barrel. The tax is projected to bring in around $57 million.

Under the plan discussed Thursday, the business-tax surcharge and taxes on beer and soda would expire in June 2013.

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