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May 22, 2006

Dems and business talk income tax

Posted by David Postman at 6:51 AM

Business lobbyists are talking to House Democrats about an income tax. At least they're talking about a corporate income tax as businesses look for a way to shift tax burden to individuals.

That came from Gary Chandler, vice president for governmental affairs for the Association of Washington Business, who spoke Saturday at the annual Cascade Conference of the Mainstream Republicans of Washington.

Chandler didn't say much about it. But he said the talks have been with Rep. Jim McIntire, a Seattle Democrat who chairs the House Finance Committee. Chandler said that when the words "income tax" are spoken "everybody wants to get up and leave the room." No wonder. Washington voters have repeatedly rejected an income tax, and since a Constitutional change would be necessary, voters get the final say.

It could be an easier sell on the ballot if it didn't include a personal income tax, but that's something that some Democrats have wanted to do for a long time. There have been a lot of studies done on variations of the income tax, most recently by a committee headed by Bill Gates Sr.

"A lot of our businesses are nervous when you mention the income tax," Chandler said after the panel. That's why the talks are moving very cautiously. But Chandler said businesses pay up to 54 percent of total taxes paid in the state -- what he describes as an unfair burden that would stop businesses from locating in Washington. He says the state's primary business tax, the business and occupation tax -- a tax on gross sales, not net income -- is unfair. "Everybody knows we have to do something," Chandler said.

But small business certainly doesn't agree that the income tax is the way to go. Carolyn Logue of the NFIB was there, too, and worried that a corporate income tax would create too much paperwork, could come with a personal income tax, too, or would be imposed on businesses and in proof of "the ultimate distrust" in government the B & O would never go away.

I don't think this was a planned announcement or a managed leak. Chandler was talking about the issues facing state businesses and tax burden is high on the list. But that it came up at a meeting of the Mainstream Republicans, the group whose spiritual leader, former Gov. Dan Evans, was in attendance, is interesting.

It comes as some voices in big business feel at odds with the state Republican Party. The Mainstreamers, who years ago may have been more easily defined by being the pro-choice wing of the Republican Party, are emerging as a voice for those who see big business and government as allies. Democrats like to think that's them. And big business here has supported Democrats in power. But business leaders have traditionally felt more comfortable with Republicans.

John Stanton, the wireless entrepreneur who is emerging as part of the new Republican brain trust, was on the same panel as Chandler and Logue. He said the split came for him last year when the state party endorsed Initiative 912 which would have repealed the gas-tax increase. Mainstream Republicans opposed it and used money from Stanton and others to help defeat the measure and save the gas tax. "That issue became a litmus test for large business as to who was on their side and who was against them," Stanton said.

Stanton quoted an unnamed "good friend of mine in business" who said business interests generally work with Democrats for more funding for transportation and education and Republicans to help keep down the costs of business. His friend said, "Ultimately we hope for divided government so the excesses of both sides can be avoided." Stanton said GOP candidates and office holders have been asking him how come they can't rely on big business backing. "Ultimately, I believe the answer is business is interested in what's good for business."

"Historically if we go back to the early days of Mainstreams when our political giants like Dan and Slade were running for office, business was solidly on the Republican side because Republicans in general opposed excessive government that created excessive costs for businesses, favored transportation and favored educational programs. Over time, whether intentional or not, the Republican Party in general in this state, I believe, has been tapped into the role of 'no.' No on government, which is often a good thing, but also no on transportation and no on education. '"

Stanton said he was alarmed that the King County Republican Party took a position recently supporting removing the WASL as a graduation requirement. (Scroll down on the county party's proposed platform and read the education section.) Given business' preference for divided government, and the state Republican Party failing Stanton's litmus test, the Mainstreamers could be a natural place for some of that money the Republican Party has relied on.

Update: I just talked with McIntire. He said, "I don't see anything dramatic. I just think there are more people who are asking the question, 'In a global economy how do you want to tax business and how do you want to ensure that you are going to be competitive over time?'" McIntire said he talks with AWB every week about taxes and "its not unusual to have these kinds of discussions." But, he said, maybe the business people "are getting a little more mainstream about the conversation."

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