Issaquah legislator backs corporate income tax

March 24, 2011

By Warren Kagarise

NEW — 10 a.m. March 24, 2011

State Rep. Glenn Anderson seeks to scrap the unpopular business-and-occupation tax and levy a flat-rate corporate income tax instead.

Besides calling for a 7 percent corporate income tax on revenues after expenses, the legislation also proposes eliminating all B&O tax exemptions and prohibiting a personal income tax.

In introducing the bill and constitutional amendment, the Fall City Republican said the idea is based on the same premise as a recent proposal from the national deficit-reduction commission to simplify the federal tax code.

In Olympia, legislators face pressure to close tax “loopholes” to help patch a $5.1 billion hole in the 2011-13 state budget.

“Let’s be honest, the Legislature could close every ‘tax loophole’ and not come even close to addressing the massive $5 billion dollar shortfall in the next two-year budget,” Anderson said in a statement. “It’s time to lay everything on the table and get serious about getting ahead of our problems, not living crisis to crisis.”

House Joint Memorial 4221 aims to put the constitutional amendment on the November ballot. House Bill 2032 includes the language about the corporate income tax and the B&O tax repeal.

The existing B&O tax rate on small and mid-size businesses can be greater than or equal to a 15 percent corporate income tax.

The initial tax shift from smaller to larger businesses is estimated to reduce state revenues by about $1 billion.

Anderson said any lost revenue could be made up during the next four to six years by job growth and increased sales tax revenue generated gradually by new workers.

“A flat-rate business tax structure would be more fair, transparent, cost less to administer and eliminate the disincentives to creating private-sector jobs,” he said in the statement.

The proposal also calls for a 60 percent vote of the Legislature to approve new tax exemptions and limiting all tax exemptions to 10 years. Lawmakers could also adopt a temporary increase of up to 3 percent if the governor declares a state of emergency.

The measure also includes a 7 percent cap on the state sales tax, as well as a requirement for a 60 percent vote of the Legislature to authorize any new sales tax exemptions. The proposal calls for total sales tax collections by state and local governments to be capped at 10 percent.

Initiative 1098, a measure to create a personal state income tax on wealthier residents, failed resoundingly last November.

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