Nealey says tax increases will extend recession, votes against tax package

Nearly $2.5 billion in tax increases over the next three years were approved Saturday in the House of Representatives despite objections by Republicans. The legislation to enact the Democrat tax package, Senate Bill 6143, was approved 52-44.

Rep. Terry Nealey, R-Dayton, voted “no” and issued the following statement:

“I’m very concerned these tax increases will extend the recession and slow down economic recovery in our state. Employers will be hit hard with business and occupation tax increases which will result in more layoffs and higher unemployment across Washington. We should be helping our employers, not burdening them with higher taxes. Consumers will also be paying more for products because of tax increases. Many people have already cut back their spending and they can’t afford new taxes. Unfortunately, state government continues to spend as it relies on taxpayers to come to the rescue.

“The 16th District is close to both the Oregon and Idaho borders, and I’m concerned some employers may moving elsewhere because of these tax increases. That’s very worrisome because we need the jobs. When people are working, they have disposable income to spend, and that means more revenue for the core services of government. That’s the ticket to draw us out of this recession. Tax increases accomplish the opposite result.

“I’m also disappointed that no effort was made to restructure our state budget and prioritize spending. My Republican colleagues and I proposed numerous solutions that would balance this budget without tax increases and provide reforms that would help stimulate job creation in the private sector. Unfortunately, Democrats were only interested in increasing taxes.”

Below is an overview of the tax package approved today in the House:


Tax Package Overview – Senate Bill 6143


Effective Date

($ in millions)

($ in millions)


0.30% B&O tax increase on all services except hospitals, scientific research and development (expires June 30, 2013)




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




Dot Foods Court Case: Complete repeal of exemption as of May 1, 2010

Cigarette and other tobacco tax increases (HB 2493)




$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




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)




Exempts microbrews (60,000 barrels or less per year);

Sales tax on bottled water




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




Exempts carbonated bottled water. Exempts first $10 million of carbonated beverage sales.

Sales tax on candy and




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




Gives DOR authority to disregard certain business transactions or arrangements; creates legislative committee to monitor implementation.

B&O tax increase on property management salaries




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%)




Applies to canned meats, such as chili, soups, and certain canned fruits and vegetables

B&O tax increase on mortgages




Narrows definition of what can be deducted

B&O tax on corporate officer salaries




Applies 1.8% B&O tax rate to corporate board of director income.

Tax increase on bad debts




Limits deduction for uncollectable sales taxes only to the seller.

Livestock nutrient management tax increase




Repeals sales tax exemption until June 30, 2013.

PUD electric bills tax increase




Directly affects Clark and Grays Harbor PUDs.

Personal liability for tax debts




Expands number of corporate officers personally liable for unpaid sales taxes.

Additional lottery marketing (SB 6409)



Assumes aggressive marketing of lottery for higher education will generate more money.

Washington State Convention and Trade Center hotel tax payment (SB 6889)



Convention center pays state yearly for hotel tax credit against general fund. Not a tax increase, but shown as revenue on balance sheet.





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