Caffeinated News & Gossip

 1. Gov. Jay Inslee is rolling out his budget proposal today and is expected to propose closing hundreds of millions of dollars worth in tax loopholes. The state is facing a $1.3 billion budget shortfall and additionally needs to add between $1 billion and $1.4 billion to its K-12 budget this biennium to meet the state Supreme Court mandate to fully fund basic education.

Environmentalists are hoping Inslee closes a $63 million break for oil companies, known as the "extracted fuel exemption," which green think tank Sightline explains here.

Basically, the tax exemption, intended to encourage wood products companies to upcycle their own waste to power their own facilities with wood byproducts (known as "hog fuel") is also being used—in a loose interpretation—by oil companies who use their own oil to power their own oil production process. Seriously? That's like giving soda companies a break for providing free sodas to its workers at lunch.

Gregoire proposed ending the extracted fuel exemption in her 2013-15 budget, 98 percent of which goes to five oil refineries, none of which existed in the late 1940s when the break was created specifically for wood products plants to reuse wood chips in the name of energy efficiency.

"We are hopeful that Governor Inslee and legislative leaders will take this commonsense step to close the big oil tax loophole," Kerry McHugh, spokeswoman for the Washington Environmental Council said yesterday afternoon in anticipation of Inslee's plan.

2. Fizz wonders if Inslee will also propose closing a $12 million break over the next six years for high-tech startups and close a tax break for luxury jet repairs worth $8 million over the next three years.

No wait, Inslee himself proposed those earlier this session.

3. State house budget chair, Rep. Ross Hunter (D-48, Medina), who's also working on the budget shortfall and the K-12 funding mandate, is also proposing a tax break—letting Costco and other retailers off the hook for paying the required license fee (17 percent of all booze sales) on the portion that comes from sales to restaurants and bars. (The fiscal note on the break comes to about $5 million this biennium, and that's without factoring in how much retailers would generate in expanded sales).

We critiqued the proposal yesterday (basically it's part of an effort to let Costco become a de facto distributor while not having to pay the same fees that distributors pay). But Hunter sees it differently. He tells us the current set up is a "duopoly" where two distributors—Southern and Youngs—"have a monopoly on distributing national brands."

He says: "Restaurants should be able to buy booze from whoever they want to buy booze from," calling the 17 percent license fee an "extra tax" in addition to the liter tax and sales tax that are already levied on booze at all levels.

Her colleagues at the chamber are reportedly pressuring her for some clarity on the issue.

"If you buy booze at retail there's one set of taxes that apply [the liter tax and the sales tax, along with the distributor tax pass through]. When retailers purchase booze [from distributors] for resale, they're already paying that set of taxes. We should not have this extra tax in the middle [the 17 percent tax], the only point of which, as far as I can tell, is to allow two unbelievably large companies who are distributors to maintain a monopoly over the system which will drive up prices at restaurants. I think there should be more competition. Exactly the same taxes will be paid on every drop of alcohol sold through restaurants under my bill rather than having a 17 percent surcharge."

Hunter is only half right. If Costco and other retailers don't have to pay the 17 percent license fee on sales to bars and restaurants and are freed up to become de facto distributors—they wouldn't have to buy from distributors, so wouldn't have to pay the 10 percent distributor tax anymore. That means it'd be the distributors who are paying an "extra tax."

4. On Monday, we reported that Seattle chamber of commerce leader Maud Daudon was seriously considering a run for mayor.

Watch for an announcement from her—maybe as early as today—about her decision.

Her colleagues at the chamber are reportedly pressuring her for some clarity on the issue.