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House Democrats pass bill to increase taxes that could close businesses in Clark County

OLYMPIA — Democrats in the House of Representatives ignored repeated opposition by Republicans and passed House Bill 2038, which would increase taxes on small service business by $905 million.

The bill was narrowly approved in a 50-47 vote as five Democrats sided with Republicans on April 24. According to the title, the intent of the bill is to fund the education legacy trust account through new taxes and ending tax exemptions that were set to expire this summer.

The largest exemption is to the business and occupation (B&O) tax on many self-employed people, small employers and service businesses. Rep. Brandon Vick (R-Felida), along with most of the Republican Party, stood and argued the impacts to business this bill would have.

“I rise as someone who is going to go back to the service industry that will be impacted by this bill. Three years ago my family business bought it… we bought the line that this would be a temporary tax,” Vick said. “So, we didn’t pass it on to our customers. We figured these were hard, economic times and decided we would step up and absorb the cost. Today we are counting pennies, and profits are incredibly tight. And now the state is going back on its agreement to end this tax. Meanwhile, they calling it a loophole instead of what it is — a broken promise.”

Republicans tried to amend the bill several times while it was in the House Finance Committee. In an out-of-character executive session, legislators went head to head for two hours while each of the Republican amendments was rejected by majority Democrats.

The taxes would come from many small businesses, including: contractors, landscapers, realtors, barbers, janitors, truck drivers, warehouse workers, bus drivers, music teachers and others. Since the B&O tax is calculated on gross income, if a company incurs a large gross income but nets little actual money they could be in for a huge tax increase. Republicans argued that because of this the B&O tax could eliminate thousands of jobs in the state.

“This bill unfairly targets the people of Clark County and the surrounding communities. If the business that comes from this tax exemption goes away the quality of life of our families and communities is going to be dramatically impacted,” Vick said. “Southwest Washington is full of niche industries and big ticket items. People in our district really benefit from this exemption because Oregon shoppers come to our area to buy those items due to the tax break. If the tax exemption ends the shoppers will leave, our businesses will close and more jobs will be lost. This is the time we should be creating jobs not destroying them.”

Now House Bill 2038 goes to the Senate for a vote. Dependent on the reaction of the Senate, the bill could be brought to the floor for a vote and pass; be changed and returned to the House for concurrence, or die. The regular session of the Legislature ends on April 28.

Tax increases included in HB 2038 for a total of  $904.8 million are:

• $534 million – Would permanently extend the business and occupation (B&O) surtax on certain businesses.

• $14.6 million – B&O tax rates for travel agents.

• $51.5 million – Would place sales and use tax on bottled water. This is the same tax that was repealed by voters in 2010.

• $63.7 million – Would repeal the nonresident sales and use tax exemption. This could especially hit our border counties very hard along Oregon and the British Columbia borders.

• $78.7 million - B&O taxes for high-tech research and development.

• $63.2 million – Public utility tax on truck transport of goods in state that are destined for out of state.

• $24.1 million – B&O and sales and use taxes for import commerce.

• $29 million – B&O tax for sellers of prescription drugs

• $40.8 million – Fuel tax for extracted fuel

• $5.2 million – Handling losses fuel tax

 

 

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