Business lobby battens down

Groups prepare to defend their interests in the legislative session

JOHN GILLIE; john.gillie@thenewstribune.com
Last updated: January 11th, 2009 12:30 AM (PST)

Business groups throughout the state say they’re marshalling their lobbying forces to keep legislators from imposing new taxes and fees on their already financially strained businesses, and to persuade lawmakers to grant them relief from existing taxes and regulations.

The case they make for their business constituents is compelling. The current economic slowdown is the worst in decades for many Washington businesses.

“I think it’s no secret that holiday sales were in the tank,” said Jan Teague, president of the Washington Retail Association. “I think the crisis we’re seeing is the worst of any since the Great Depression.”

“The situation is unprecedented in recent times,” said Don Brunell, president of the 6,600-member Association of Washington Business. “I hear people talking about looking back to 1932 to see what they did then to cure their economic problems.”

While the decline here has been less severe than in other states, the business reversals still are troubling in Washington.

Auto sales for 2008 were down overall by 18.6 percent through November, said Bryan Imai, senior counsel of the Washington Auto Dealers Association. The sales declines will likely be even worse when December figures come in, he said.

Thirty-three new-car dealers in the state have either went out of business or consolidated their operations with others in 2008, he said.

In the real estate and building industries, business has dropped precipitously.

“A lot of our members are hurting,” said Greg Wright, president of the Washington Association of Realtors. “Agents are having to adapt to a whole new market.”

But while business is suffering, so is the state. Present estimates call for a budget shortfall of $5.7 billion, and some legislative leaders expect that to rise to $7 billion as the economic problems persist and deepen.

That translates to a legislative session, which begins Monday, focused on filling the gaps and minimizing the damage to state programs.

“The budget will dominate the session because this is an unprecedented gap between state revenue and expenditures,” said Sen. Majority Leader Lisa Brown, D-Spokane. “It could get worse before it gets better in terms of our forecasts. Both our forecast for people who need state services and our forecast for state revenue could be worse than the situation that the governor’s (budget) addresses.”

Most business groups anticipate their role in lobbying the Legislature this year will be primarily defensive: keeping legislators from imposing new taxes and fees on businesses and protecting the tax breaks already in place.

“Our main objective for this session is to see that the Legislature does no harm,” said Troy Nichols, state director for the National Federation of Independent Business. “We don’t want to see taxes increased to pay the state’s bills,” he said.

“We’ll be playing a lot of defense,” said Amy Brackenbury, a lobbyist for the Building Industry Association of Washington.

Business association executives and lobbyists say that now more than ever they need the ear of sympathetic legislators because new taxes could be the death knell of many businesses already struggling to keep their doors open.

While much of the time business groups will be lobbying to protect themselves from new taxes, they also will be asking the Legislature to enact new laws designed to enhance their prospects in the years to come.

Here are some of the more prominent items on businesses’ legislative wish lists:

 • Protect businesses from becoming the funding source for Washington’s paid family leave law. That law, scheduled to become effective in October, is not currently funded. Businesses fear the Legislature may impose taxes on them to provide funding for the program. The act provides for six weeks of paid family leave for employees of businesses with 25 or more employees when they care for a newborn or an adopted child.

The Legislature adjourned last year without designating an agency to administer the act or funding the program. The Association of Washington Business and the business federation want no new business taxes to fund the program. Workers themselves should fund the program, the association believes.

 • Stave off efforts to repeal existing exemptions to the sales tax for the purchase of machinery, the repair and replacement of equipment and to the business and occupation tax on research and development costs. During a prior recession in 1981, the Legislature repealed that exemption. It wasn’t restored until 1995.

Ken Myer, president of the Washington Technology Industry Association, said the research and development exemption is particularly critical for the technology industry which often investments hundreds of millions of dollars in research and development activities before generating a dollar in sales of a finished product.

The association’s Brunell said replacing and repairing equipment is critical to keeping Washington manufacturers competitive with rivals in other states.

 • Maintain the sales tax exemption for digital goods. With many Washington companies selling digital products, defending the tax exemption on such products as digital ringtones, music, photos and other items is important to the state’s Internet-based producers and retailers, said Myer.

 • Waive first-offense penalties for businesses that apply the wrong sales tax percentage to shipped goods. Present law requires merchants who ship goods to other Washington destinations to apply the proper sales tax for the jurisdiction where the customer lives. With dozens of different sales tax rates in the state because of diverse taxing districts, it’s easy for merchants to be confused, said the federation’s Nichols. That organization also wants the state to update those sales tax rates less frequently. Every time the state updates its sales tax maps, it costs merchants time and money to pay for software updates to keep up.

 • Business and occupation tax relief for car dealers. Dealers association lobbyist Imai said Washington dealers are at a competitive disadvantage to out-of-state dealers who don’t have to pay business and occupation taxes on gross sales. That’s been a particularly important concern in Vancouver and Spokane where competing dealers are just across the state line. But some out-of-state dealers are advertising in the Seattle-Tacoma area and stealing sales from area dealers, he said. B&O taxes impose are a disproportionate burden on car dealers, a high-dollar, but low-profit-margin business. B&O taxes are imposed on gross sales numbers, not on profits.

 • Higher document service fees for car dealers. The state allows dealers to charge $50 for preparing car licensing and ownership paperwork. The dealers’ association wants that increased.

 • Workers’ compensation fee refunds. Some associations, such as the Builders Association operate workers compensation pools for members. That allows members to spread the risk of worker disability cases over a larger base. If the plan collects more money than needed to pay costs in a given year, the state refunds extra funds. The builders’ association now rebates 80 percent of those refunds to members and uses part of the remaining portion for association activities, including safety promotion, but also for political support for candidates. Some in the Legislature want to take that money from the association. The association wants to keep it.

 • Delayed payment of development impact fees. Most jurisdictions now collect impact fees for new developments up front as the developments are created. Builders want the fee collection deferred until the homes and buildings are sold. The collection delay would lessen the risk for developers by decreasing the upfront costs for building new homes.

 • Expanded programs to provide first-time home buyers access to down payment funds. The Realtors want the Legislature to expand the bonding capacity of the Washington State Finance Commission to give it more funds to provide down payment assistance for first-time homeowners. The program, said the Realtor’s Wright, won’t cost taxpayers any additional money.

 • A new method of calculating taxes on so-called “short sales” of distressed properties. In a short sale, the market value of the home has declined below the amount the owner has borrowed against it. The bank agrees to accept the sales price in satisfaction of the loan. The state Department of Revenue, said Realtor’s association president Wright, now charges taxes on the sale based on the loan amount. The Realtors maintain the tax should be based on the actual sales price. They’re meeting with the department to try to persuade it to change its interpretation of the law. If that’s unsuccessful, the association will seek legislation to mandate that rule change.

 • Derail legislative efforts to penalize rural home developments in the name of pollution reduction. The Realtors’ Wright contends that rural development doesn’t necessarily create disproportionate carbon emissions. Some rural housing is built in a sustainable manner, and rural residents don’t always compute long distances to work. A more creative and flexible solution is needed to cut back carbon emissions, he said.

 • Oppose proposals to tax container traffic at state ports. California has imposed such a tax, but the Tacoma-Pierce County Chamber of Commerce believes that Washington ports would lose a competitive advantage if such a tax were imposed here.

 • Find ways for small businesses to provide health care for their workers while reducing overall health care costs, perhaps by creating a more limited basic health care plan at the state level. Both the Tacoma-Pierce County Chamber and the Washington Retail Association favors such initiatives.

The retail association’s Teague said that while the state’s initiatives are important in getting business back on track, Congress will likely bear a larger burden of jump starting the economy.

If that happens, she said, business should begin showing some signs of revival next year.

“I think there’s a great deal of pent-up demand. People just need permission to spend again,” she said.

John Gillie: 253-597-8663

blogs.thenewstribune.com/business

Originally published: January 11th, 2009 12:30 AM (PST)