This Washington

After Two Days of Budget Talks, Tax Exemptions Back in Spotlight

By Josh Feit March 13, 2012

The five corners in Olympia—the Democratic and Republican leaders form the party caucuses in both houses plus the governor—have been meeting for two days now to define the parameters of what a budget looks like—"what's in the box," to use their nifty legislative parlance.

The budget parameters also include other issues such as the K-12 employee health care plan and the $1 billion jobs bond proposal, which is part of the capital budget. I summarized those issues here.

Here's where things stand after today's five corners meeting which includes only Gov. Chris Gregoire, senate majority leader Sen. Lisa Brown (D-3, Spokane), minority leader Sen. Mike Hewitt (R-16, Walla Walla), speaker of the house Rep. Frank Chopp (D-43, Seattle), and minority leader Rep. Richard DeBolt (R-20, Chehalis).

Gov. Chris Gregoire has identified a $250 million problem: The Republicans don't like the Democrats' idea of delaying a $330 million payment to schools and the Democrats don't like the Republicans' idea of skipping a $130 pension payment to state workers. Gregoire has recommended that both sides scrap both, split the difference, about $250 million, and make it up  in "resources" they can agree on.

Gregoire has suggested that they look at closing tax loopholes. "There are plenty of those," Sen. Lisa Brown (D-3, Spokane), the senate leader, says. The senate Democratic budget—the one that was shoved aside by the 22 Republicans and three Democrats who voted for Republican Sen. Joe Zarelli's (R-18, Ridgefield) coup budget—got rid of two exemptions: a $20 million exemption for big banks on interest on first mortgage loans and a $12 million exemption for wind energy machinery. (And Brown points out that the bank exemption will bring a bigger savings, perhaps $40 million, in the next biennium as the economy rebounds).

The house Democratic budget includes the $20 million from the banks, but did not end the energy loophole.  The Zarelli budget doesn't close either loophole.

Back in November
, Gregoire herself recommended about $282 million in closing loopholes and new taxes including closing the bank loophole, repealing the sales tax exemption on out-of-state shoppers, closing a tax loophole for Washington companies that create out-of-state shell companies, increasing the cigarette tax, and taxing oil and financial companies windfall profits. All of the ideas would take a two-thirds majority, which is certainly doable in a preordained bipartisan budget deal.

Brown says there's agreement among the three of the corners—the senate Democrats, house Democrats, and the governor—but the Republicans have not agreed to that approach so far.
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