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Dear Friends and Neighbors,

We're done!  The 30-day special session called by Gov. Gregoire adjourned around 1:30 a.m. this morning.  Despite all the rhetoric, despite all the platitudes and promises, state spending was only cut by 0.8 percent from last year's budget.  When compared to the private sector, where over 189,000 jobs have been lost since the beginning of the recession in February of 2008, this small cut in state spending is pathetic.

This session has been a lost opportunity.  The Democrat majority refused to streamline or reform state government or look for efficiencies that would have a long-lasting effect on our state's budget.  As early as last November and all throughout the legislative session, Republicans offered budget solutions so that taxes would not have to be raised.  We were ignored.  As a result, we'll be looking at another budget shortfall of around $5 billion next year!

The most disheartening part about this session will undoubtedly be the impact that the new and increased taxes will have on struggling families and employers around our state and specifically in the 9th District.  Over 70 percent of the final solution to our state's $2.8 billion shortfall consisted of one-time money from dedicated state accounts and the federal government and new or increased taxes.

In fact, the Democrat majority passed nearly $1.7 billion in new and increased taxes for the 2011-13 biennium ($794 million the first year alone!).  This represents the largest tax increase in our state's history!  Following is a specific breakdown of the tax increases.  These new and increased taxes will further hamper our state's economic recovery and lead to more job losses:

Tax Package Overview – Senate Bill 6143
Description Effective Date 2009-11
($ in millions)
2011-13
($ in millions)
Notes
0.30% B&O tax increase on all services except hospitals, scientific research and development (expires June 30, 2013) 5/1/10 $241.9 $483.1 Includes permanent doubling of small business B&O credit and increase in reporting threshold for service business from $28,000 to $46,667.
B&O tax increase on direct sellers 5/1/10 $155.0 $199.4 Dot Foods Court Case: Complete repeal of exemption as of May 1, 2010
Cigarette and other tobacco tax increases (HB 2493) 5/1/10 $101.4 $197.8 $1 per pack for cigarettes; OTP from 75% to 95% of wholesale price, 65 cent cap for cigars, weight-based tax for moist snuff.
B&O tax on economic income 6/1/10 $84.7 $407.3 Changes standard for applying B&O taxes from physical presence to economic presence. B&O deduction for aircraft loans (Alaska Airlines).
Beer tax increase – 50 cents per gallon (28 cents per six pack) 6/1/10 $59.0 $118.0 Exempts microbrews (60,000 barrels or less per year);
Sales tax on bottled water 6/1/10 $32.6 $69.2 Provides a refund for tax paid on prescriptions and those without an available source of potable water.
Soda pop tax increase – 2 cents per 12 ounces 7/1/10 $33.5 $72.4 Exempts carbonated bottled water. Exempts first $10 million of carbonated beverage sales.
Sales tax on candy and gum 6/1/10 $30.5 $62.4 Includes $1,000 B&O tax credit for in-state candy manufacturers until July 2012; Department of Revenue (DOR) must compile a list of candy that is taxable and not taxable.
Taxes on business structure transactions 5/1/10 $8.5 $30.4 Gives DOR authority to disregard certain business transactions or arrangements; creates legislative committee to monitor implementation.
B&O tax increase on property management salaries 6/1/10 $6.9 $14.8 Exempts non-profit property management companies and private companies that contract with public housing authorities.
B&O tax increase on certain canned meat products (from 0.138% to 0.484%) 6/1/10 $4.1 $8.8 Applies to canned meats, such as chili, soups, and certain canned fruits and vegetables.
B&O tax increase on mortgages 6/1/10 $3.6 $7.9 Narrows definition of what can be deducted.
B&O tax on corporate officer salaries 7/1/10 $2.1 $4.6 Applies 1.8% B&O tax rate to corporate board of director income.
Tax increase on bad debts 5/1/10 $1.7 $4.1 Limits deduction for uncollectable sales taxes only to the seller.
Livestock nutrient management tax increase 7/1/10 $1.3 $2.8 Repeals sales tax exemption until June 30, 2013.
PUD electric bills tax increase 5/1/10 $1.2 $2.2 Directly affects Clark and Grays Harbor PUDs.
Personal liability for tax debts 5/1/10 $1.1 $2.0 Expands number of corporate officers personally liable for unpaid sales taxes.
Additional lottery marketing (SB 6409) 7/13/10 $15.0 Assumes aggressive marketing of lottery for higher education will generate more money.
Washington State Convention and Trade Center hotel tax payment (SB 6889) 6/30/11 $10.0 Convention center pays state yearly for hotel tax credit against general fund. Not a tax increase, but shown as revenue on balance sheet.
TOTAL $794.1 $1,687.2

The Legislature spent all 30 days of a 30-day special session debating and deliberating which of your taxes to raise.  If they had spent this amount of time, energy and commitment on balancing the budget through serious reforms and efficiencies, we wouldn't have needed a special session to begin with and we certainly wouldn't need new taxes!

While I am extremely disappointed in the direction taken by the Legislature this year, I am very grateful for all the support I've received from back home.  So many of you have contacted me with encouraging words or to let me know that I'm on the right track in representing you and your interests in Olympia.  I am so honored and so blessed.

Thank you for being involved and reading my e-newsletters.  As this is an election year, certain restrictions will soon limit my ability to communicate with you.  But I hope to see you at the many fairs, community days and civic events across the district over the spring and summer.  And, I'm very much looking forward to some time in the fields on my tractor.  I'm a little behind on my planting and miss the feel of good soil under my fingernails and some much-needed grease on my jeans!

God bless and thank you for the privilege of serving as your Representative.

Sincerely,


Joe Schmick

State Representative Joe Schmick, 9th Legislative District
RepresentativeJoeSchmick.com
426B Legislative Building | P.O. Box 40600 | Olympia, WA 98504-0600
joe.schmick@leg.wa.gov
360-786-7844 | Toll-free: (800) 562-6000