WASHINGTON – Just hours before it was to come to a vote Tuesday, House Republican leaders yanked a bill that could have cost Washington state and its local governments more than $700 million in business tax revenue annually.

Members of the Evergreen State’s congressional delegation had spent the past two days frantically lobbying their colleagues to block the measure.

“We went to full battle stations on this,” said Rep. Norm Dicks, D-Belfair.

Rep. Dave Reichert, R-Auburn, said he considered the measure dead for the session.

“As far as I know it is gone,” Reichert said. “Let’s hope they don’t change their minds.”

The National Governors Association criticized the bill as a “federal corporate tax cut using state tax dollars.” But backers, including financial institutions with credit card operations and companies involved in e-commerce, argued it was needed because the array of state taxes were confusing and unfair.

Washington would have been affected more than any other state because of its reliance on a business and occupation tax rather than a corporate income tax. The measure essentially would shield many companies doing business in Washington from the state’s B&O tax.

Dicks and Rep. Doc Hastings, R-Pasco, led the lobbying campaign. They sent letters to lawmakers representing the 10 other states that would be most affected by the bill. Dicks said Hastings also lobbied the House Republicans leadership.

“We talked to a lot of people,” Dicks said. “People read the letters we sent out. Their governors weighed in. When you look at a list of who gets nailed, you’ve got a lot of states.”

Hastings declined to comment.

Reichert said his staff was in close contact throughout the day with the staffs of House Speaker Dennis Hastert of Illinois and Majority Whip Roy Blunt of Missouri.

“We had to make known our strong objections,” said Reichert, adding it wasn’t necessary for him to have face-to-face meetings with Hastert or Blunt because their staffs got the message. “We asked them to pull it, and they did.”

Blunt’s office had no immediate comment.

Other members of the state’s congressional delegation joined in circulating letters to Hastert.

“States like ours that don’t have an income tax to fall back on would have been forced to bear the brunt of this unfair tax burden,” said Rep. Brian Baird, D-Vancouver.

Washington collects taxes from companies that have a physical presence in the state, which is defined broadly and can include just a part-time sales staff. The House legislation would narrow the definition and limited which companies Washington state could tax.

The measure would cost Washington state and local governments $138 million in the first year and up to $689 million annually in subsequent years, according to an analysis from the governors association.

Nationally, the association said, state and local governments could lose more than $3 billion in revenue annually by 2011.

Washington Gov. Chris Gregoire expressed relief Tuesday.

“Washington’s congressional delegation was united in their opposition to this unfair bill,” Gregoire said in a statement.

A similar measure in the Senate faces an uncertain future. Both Washington senators said they will do everything they can to block it.

“I’m an advocate of tax reform, but not in a way that doesn’t take into account Washington state’s unique tax system and is more harmful than helpful,” Democratic Sen. Maria Cantwell said in a statement.

Washington state’s other senator, Democrat Patty Murray, said the state’s lost revenue would be equivalent to what it spends on higher education or receives in federal funding for its prisons.

“At a time when states are struggling with mounting deficits, the cost of health care, skyrocketing fuel prices and facing another hurricane season, this legislation amounts to yet another unfunded mandate,” Murray said in a statement.

Les Blumenthal: 202-383-0008

lblumenthal@mcclatchydc.com