Senate panel gives tax breaks to businesses - Bills would help fitness clubs, call centers, computer companies

Richard Roesler
The Spokesman-Review Staff writer

OLYMPIA, WA 4/9/03-- Undeterred by a Santa-costumed union member protesting "early Christmas" for corporations, a Senate committee on Monday gave a thumbs-up to $96 million in state tax breaks.

The bills, which must still be approved by the Senate and House of Representatives, include tax breaks for health clubs, flax seed growers, Microsoft, rural telephone call centers, arts groups, semiconductor makers and other industries.

Not all were new. In several cases, Monday's vote simply extended an already-existing tax break.

Democrats on the Senate Ways and Means voted against most of the tax breaks, but were outvoted by Republicans, who hold a slim majority in the Senate.

"Tax breaks go on forever," said Sen. Erik Poulsen, D-Seattle, complaining about the "special favors" the committee doled out Monday. "I consider this a very dark day for the Legislature and for the public."

Republicans argued that tax breaks invest in Washington's economy. They said they spur new jobs, encourage businesses to grow or move here, and bring in more taxes in the long run.

"I hope they're used. That means people are going back to work," Sen. Dino Rossi, R-Issaquah, said of the tax exemptions passed Monday.

Monday's committee hearing came on the heels of Senate Republicans unveiling their no-new-taxes budget proposal last week.

That two-year spending plan proposes cutting prenatal care for illegal aliens, eliminating state subsistence checks to unemployable people like the homeless mentally ill, and leaving tens of thousands of children without health insurance coverage.

Instead of offering high-tech companies multimillion dollar tax incentives, Democrats said over and over Monday, the state should be collecting that money and spending it on human needs.

Washington has more than 400 tax breaks, some of them dating back to the 1930s. Virtually everyone in the state benefits from at least one big tax break: no sales tax on most grocery items.

One of frequent criticisms of Washington's tax breaks is that it is extremely rare for a tax break to be revoked. There are still tax breaks on the books for aluminum ingot warehousing, for example, or to encourage nuclear fuel manufacturers to set up shop in Washington.

"There are timelines for people on welfare, people on GAU (stipends for the unemployable), for kids in college," said Sen. Lisa Brown, D-Spokane. "But no timeline for tax exemptions."

"It's the gift that keeps on giving," said Poulsen.

Historically, the Legislature also has rarely scrutinized past tax breaks to see if they're really creating new jobs and vibrant industry. In one case, Sen. Darlene Fairley said, a $24 million tax break has resulted in only 70 jobs.

"So each job cost us about $375,000," said Fairley, D-Lake Forest Park. "I think these guys are taking us to the cleaners, for relatively few jobs."

Brown singled out Monday's Senate Bill 5423 for special criticism. It would give health clubs a $6 million tax break from 2005 to 2007.

"The fitness centers that we just exempted? Look at our expanding waistlines," she told lawmakers. "Are fitness centers going out of business? Will Washington state no longer be competitive in the fitness industry?"

Republicans said that the impact of tax breaks is further-reaching than it might seem. Sen. Joe Zarelli, R-Vancouver, said that jobs and salaries ripple out into the economy, helping create other opportunities.

"We're actually creating more by investing in this way," he said.

A vibrant economy helps pay for programs for the poor, said Sen. Larry Sheahan, R-Spokane.

"I think we need to remember where the money comes from that we spend on education and social services and all the things we care about," he said. The state budget two years from now will be "a disaster," he said, unless the state's economy bounces back.

Brown said she expects tax breaks to keep trickling in, since it's easy for a business to hire a lobbyist to push a tax exemption for them in Olympia.

"It's a stream. It's an industry," she said. "It's soon to become an ocean."

A few of the major tax-break bills passed Monday, and how much in taxes the state will lose over two years:

•SSB 5531: High-technology research and development: $62 million.

•SB 5529: Research and development: $12 million.

•SB 5614 : Tax breaks for manufacturing, research and development or computer services in rural areas: $15 million.

•SSB 5319: Incentives for the construction and maintenance of rural telephone calling centers: $4.6 million.

•SB 5423: Physical fitness services: $6 million, but won't take effect for two years.

•SB 6028: Lower tax for manufacturing flax seed oil: $64,000.

•SB 5071: Tax break for some aviation businesses: $1 million.

•SB 5182: Computer centers in rural counties: $534,000.


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