This Washington

Governor's B&O Tax Proposal Stumbles

By Erica C. Barnett February 7, 2012

Although legislators, small and big business, and city officials and representatives claimed to be close to a compromise on Gov. Chris Gregoire's controversial proposal to consolidate all business and occupation tax collections at the state level, there was no sign of mutual understanding at today's senate ways and means committee meeting, where big business and the governor's office squared off against small businesses and cities for and against the proposal.

"I put this on the agenda because it was my understanding that the executive and the cities were moving closer together, but ... the sign-in sheet indicates no movement," committee chair Ed Murray said. "I'm not interested in moving this forward unless we see movement on both sides of the issue."

Seattle council member Richard Conlin responded: "We feel that we've eliminated some of the worst aspects of the initial draft … but I don't think we're anywhere near the point where we've reached a" solution.

Murray shot back: "I was told by your council president that you all and the governor's office were coming closer together, yet your testimony wouldn't indicate any movement at all." (It wasn't the first time Murray and Conlin had exchanged words over the city's relationship with Olympia).

The cities' main complaint has been that centralizing B&O tax collections will cause them to lose revenue---in Seattle, as much as $43 million, according to the city's finance department.

The latest version of the bill would still create a centralized system (through a special committee to be formed in the future), but it would still allow cities, like Seattle, that already have a B&O tax to continue to collect it under their existing system. However, the proposal would give preferential treatment to cities with the new, centrally collected B&O tax when providing all kinds of state tax assistance.

And the bill, by creating a centralized tax-collection system, would open the door for legislators to both force cities like Seattle to centralize their B&O collections and give cities that don't collect B&O taxes an easy way to start doing so.

Opponents of the bill argued today that, rather than creating a more streamlined B&O tax, the proposal would add another layer to the state's already complicated tax system.

"The legislation simply does not achieve the very laudable objective of a simpler, less complex tax system," Seattle council Richard Conlin told the committee. "The bill will actually add complexity by creating an additional option for B&O taxes for cities."
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