Turning Up the Heat for New Taxes

The AIAWA is paying close attention to the State Budget; there is concern that the deficit will cause legislators to target architects with a new taxes. The latest news is not encouraging. Other groups have also been watching the budget and during the recent gubernatorial campaign the state’s financial situation was a hot topic. At the time of the election, forecasters predicted there would be a $3.2 billion gap between expected revenue and planned spending. They underestimated.

Yesterday, the State Revenue Forecast Council, as reported by the Seattle Times and other news outlets, stated that the state’s budget deficit now is a whopping $5.1 billion. And, there will be one more forecast before the budget is finalized – meaning the budget hole may grow even more. The Seattle Times also pointed out that, “State spending has increased by $8 billion since Gregoire was elected governor in 2004.”

AIAWA previously warned about the impact of a big budget deficit on the profession. Even before the latest forecast, legislative leaders were predicting the need for new taxes.

Senator Lisa Brown, the Senate Majority Leader, said that the definition of tax increase is important and “closing loopholes” isn’t equivalent to raising taxes. Representative Hans Dunshee, the probable next chair of the budget-writing House Appropriations Committee, said “… it’s likely any tax proposal would go to a vote of the people.” Under the state Constitution, the legislature can by-pass the governor and put a bill directly on the ballot without her signature. Such a move would push every business group in the state, including the AIA, to raise money and have a voice on a ballot measure next year.

Longtime budget analyst Richard Davis (former head of the Washington Research Council and now with the Association of Washington Business) wrote in yesterday’s Everett Herald, “Some lawmakers will want to extend the sales tax to business and professional services.” He further writes, “Others will press to repeal existing tax exemptions. A repealed exemption is a tax hike.”

As previously reported, four years ago when the budget hole was much smaller (more than half of what it is projected at now), there was a host of new taxes introduced. In the end, they did enact a huge new tax on estates and raised taxes on selected industries and products; that set the precedent of going after targeted industries. In addition, the legislature may choose to eliminate tax incentives passed in recent years for renewable energy, energy efficiency, affordable housing or other important environmental and economic benefit programs.

The AIAWA will continue to closely review the budget and tax bills for direct or indirect impacts on the profession and your businesses. Please look for more updates from us.