Tax would balloon to $1 billion from $773 million under Senate majority proposal 

The state Senate’s majority Democrats should simply repeal the badly flawed business-tax increase that took effect Jan. 1 rather than pursue a new plan that would take far more money from professional-service providers, says Sen. John Braun.

“The majority wants to replace a dysfunctional and unnecessary tax increase with one that’s still unjustified but is easier to collect, fully aware that the hit on employers would now soar to a billion dollars over four years,” said Braun, R-Centralia and Republican leader on the Senate Ways and Means Committee. The panel will have a public hearing on the proposed replacement at 3:30 p.m. today in Senate Hearing Room 4 at the state Capitol. 

“Calling for a do-over that knowingly puts hundreds of millions more into government’s hands is a whole new take on the concept of ‘government greed’. It would be better to listen to the voters who gave this tax a thumbs-down, roll the rates back to the pre-2019 level and then just walk away. With the state’s revenue picture running 850 million dollars ahead of projections, Olympia can afford to let these employers keep more of their money,” Braun said.

House Bill 2158 raised the business-and-occupation tax on service providers such as veterinarians, engineers, and accountants by 20 percent and is projected to bring in a total of $773 million across the 2019-21 and 2021-23 budget cycles. Despite its serious flaws, Democrats adopted the policy over unanimous Republican opposition and also tied funding for higher education to the tax increase. That marked a major shift in budget priorities from 2015, when Braun and Senate Republicans engineered a historic tuition cut without new taxes.

HB 2158 was opposed by more than 62 percent of voters on the November general-election advisory ballot. Soon after, the state Department of Revenue informed a Senate committee that a “significant volume of ambiguity” in the law would jeopardize the agency’s ability to administer the tax collection and the ability of taxpayers to comply with the 20-percent tax hike.

The proposed replacement, Senate Bill 6492, would maintain the 20-percent tax increase in the flawed law but apply it only to employers with sales over $1 million annually. However, Braun cautioned that it would be false to think the million-dollar-sales threshold keeps the new bill from threatening Main Street employers, noting that sales figures don’t go hand-in-hand with income once all the costs of operating a business are paid. 

“None of the dozen tax increases approved in 2019 was justified considering how much revenue was already coming in a year ago,” Braun explained. “HB 2158 began with the governor, who wanted even more money to spend and simply decided these service providers were undertaxed. The majority tried to legitimize it by calling it a ‘surcharge’ and hitching it to our higher-education institutions, but someone clearly blundered on the policy part.”

Braun said it doesn’t help that the Democrat representative who was prime sponsor of HB 2158 is also proposing a different “fix” for the unworkable law, as HB 2468.

“This business-tax increase was adopted on the final day of the 2019 session, and there’s a good chance the discussion about replacing it will drag on to the final day of this session. That’s another argument for simply repealing it instead, and to stop targeting this sector of our economy,” he added.