Tacoma sees drastic cuts if B&O tax changes

KENNETH P. VOGEL; The News Tribune


Tacoma, WA - Tacoma would be forced to cut police and fire services if a bill that passed the state House on Wednesday becomes law, according to Mayor Bill Baarsma.

"If this bill were in effect today, it would blow a $10 million hole in our biennial budget," said Baarsma, who has visited Olympia to lobby against the measure.

Businesses have long complained that the 37 Washington cities - including Tacoma - that levy a business and occupation tax do so differently and sometimes tax the same income.

House Bill 2030 would require those cities to adopt a uniform version of the so-called B&O tax by the end of 2004.

Then, by 2008, the cities would have to levy the B&O tax on firms using a formula meant to gauge how much of their business occurs in a given city.

"This is about making our businesses more competitive," said state Rep. Lynn Kessler (D-Hoquiam), the prime sponsor of HB 2030.

Supporters of her bill asserted that the patchwork structure of B&O taxes confuses companies and discourages them from doing business in cities that impose the tax.

If a company does business in multiple B&O cities, it could be forced to pay the tax on the same income to several cities.

"It is double taxation," said state Rep. Ed Orcutt (R-Carrolls). "It's unfair to the businesses."

Though he conceded that "this is probably a tax that needs to be corrected," state Rep. Steve Conway (D-Tacoma) voted against HB 2030, which passed 73 to 25 and goes to the Senate. "I don't think this is a time when we should be delivering a message about possible cuts in city revenue."

Tacoma in 2001 collected $20.6 million in B&O taxes, or about 11.8 percent of its operating revenue, according to the Association of Washington Cities. According to the association, other South Sound cities that levied the B&O tax in 2001and the amounts they collected were the following.

•Algona: $112,000, or 6.1 percent of operating revenue.

•Black Diamond: $72,000, or 3.1 percent of operating revenue.

•Buckley: $61,000, or 2.1 percent of operating revenue.

•Dupont: $276,000, or 9.6 percent of operating revenue.

•Lacey: $1 million, or 3.2 percent of operating revenue.

•Olympia: $3.1 million, or 7.5 percent of operating revenue.

•Roy: $12,000, or 3 percent of operating revenue.

•Ruston: $17,000, or 3.8 percent of operating revenue.

•Tumwater: $1 million, or 10.2 percent of operating revenue.

The bill would require a study to determine whether B&O cities would be harmed. It also has a provision that would allow cities to raise other revenue if they lost a lot from the B&O changes.

Baarsma predicted the changes would have a "catastrophic" effect on Tacoma.

"This is a nightmare. This is coming at a time when we're about to go to war," he said, adding he was disappointed the House passed it. "And I'm fearful that the Senate may as well."

The Senate had not acted on a companion bill, though the B&O changes have the blessing of Gov. Gary Locke.

Kenneth P. Vogel: 360-754-6093


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