When House Democrats passed their controversial tax-increase legislation on April 24, it contained a section that would permanently extend the business and occupation (B&O) surtax on service businesses. They described this group as “doctors, lawyers, architects and others.” It turns out that “others” represents a very large category of individuals and employers.
When House Republicans requested a list of the service businesses that would be impacted by House Bill 2038, it was not readily available. Working with the state Department of Revenue, they were able to compile a comprehensive list.
Included on the list are these types of individuals and employers: assisted living facilities, auto dealers, builders, child day care facilities, child group foster homes, civic organizations, death services, dentists, educational support services, employment services, family services, grantmaking and giving services, fine arts schools, home health care services, housing programs, legal services, medical labs, nannies, newspaper publishers, nursing care facilities, outpatient care centers, performing arts companies, personal care services, radio and television broadcasting, real estate activities, technical and trade schools, vocational rehabilitation services, and independent artists, writers and performers, to name a few of the more than 144,000 employers that would be impacted.
“House Democrats have sold their plan by criticizing some tax incentives as ‘reckless, unneeded and corporate freebies.’ Then they turn around and pass legislation that would raise taxes on things like child day care services, home health care services, and technical and trade schools,” said Rep. Joel Kretz, R-Wauconda, and deputy leader for the House Republicans. “House Democrats make it sound like they are going after the big corporations on Wall Street, but in reality they are going after the little guy on Main Street.”
House Bill 2038 would increase taxes by $879 million – with $534 million coming from the permanent extension of the B&O surtax on service businesses. House Democrats believe these tax increases are necessary to increase state spending by 10 percent in the upcoming 2013-15 budget cycle. The issue is a source of contention in the ongoing 30-day special session that began on May 13.
Without House Bill 2038, the state is still expected to collect $2 billion more in revenue for the upcoming budget cycle (2013-15) compared to the current one that ends June 30. Some House Democrats have described this fact as a “myth.”
“This bill is an attempt to continue a so-called temporary measure that punished thousands of small business people who were already suffering in the recession – businesses that were trying to survive, businesses that provide the bulk of jobs in this state,” said Rep. Cary Condotta, R-East Wenatchee. “They have paid dearly as all of us have. I cannot believe House Democrats’ can support this bill, continuing to punish small business people and reduce job creation, and then look at their constituents with a straight face.”
“It is clear to everyone our state economy is fragile. Employers and consumers are looking to Olympia and Washington, D.C. to see what’s coming down the pike at them. Raising taxes would send the wrong message and have real consequences for our economy,” said Rep. Norma Smith, R-Clinton, and ranking Republican on the House Technology and Economic Development Committee. “The special session really comes down to two approaches. Both sides want to invest more in K-12 education and that’s a good thing. But one side wants to increase taxes by nearly one billion dollars, while the other side wants the state to live within its means.”
Gov. Jay Inslee also supports the permanent extension of the B&O surtax on service businesses, despite numerous promises as a candidate and after being elected that he would not support tax increases.
A statewide public poll from late April suggests that a large majority of Washingtonians disagree with House Democrats and the governor on the issue of raising taxes. The Moore Information poll found that 61 percent of Washingtonians would prefer to “reduce spending, even if some crucial programs are cut” rather than “increase taxes, even if it is hard for middle-class families.”
The 2013 legislative session ended April 28. A 30-day special session began on May 13.