Not often do you hear a state legislator from Seattle address the frustrations of Southwest Washington residents who work in Oregon and therefore must pay Oregon income tax.
But that scenario took center stage this week as House members advanced an updated revenue proposal.
“I think we all know that it is patently unfair that Washing residents who work in Oregon pay the Oregon income tax,” Rep. Reuven Carlyle, D-Seattle, said on the House floor Thursday evening. “Oregon residents who shop in Washington state do not pay our sales tax, and it’s not fair. We can do better.”
Carlyle was advocating for what he considers a compromise in the face of tough fiscal times: rather than completely eliminate the sales tax exemption, lawmakers should establish a rebate program that later reimburses out-of-state shoppers for the taxes they paid. If those shoppers paid at least $25 in sales tax in Washington, then they could file paperwork to get that money back, according to the proposal.
It was one of a few changes to tax breaks left standing after House Democrats’ scaled back their previous budget plan and invited Republicans to meet them in middle. The 30-day special legislative session, which gave legislators more time to reach a budget agreement, ends Tuesday with no sign of that agreement in sight.
After Carlyle spoke, Rep. Ed Orcutt, R-Kalama, said the sales tax rebate program isn’t good enough; it will still discourage out of state shoppers from making purchases in Washington.
“This does not work well for Washington state,” Orcutt said. “We’ve got a number of employers in Southwest Washington … whose clientele is 20, 30, sometimes 40 percent Oregonians. When this is passed, those Oregonians will no longer pass the river. They will no longer shop in the state of Washington.”
The revenue proposal, House Bill 2036, passed with a vote of 52-35. Reps. Jim Moeller, D-Vancouver, and Sharon Wylie, D-Vancouver; voted in its favor. Orcutt and Reps. Liz Pike, R-Camas; Monica Stonier, D-Vancouver; and Brandon Vick, R-Vancouver; voted no. Rep. Paul Harris, R-Vancouver, didn’t vote on the bill.
You can watch the floor debate by clicking here. (Sorry, but Word Press won’t let me embed the video.)
After representatives agreed to pass the House budget proposal, sending it to the Senate for consideration, Pike and Moeller issued statements addressing the sales tax exemption.
“It would kill Southwest Washington businesses that rely on a large percentage of Portland shoppers because their sales tax exemption would go away. Why would they continue to shop here when they could stay home to make purchases and not pay sales tax?”
Moeller expressed a different view:
“We all need to pay our fair share of taxes, including out-of-state shoppers. To level the playing field, we need to close some of Washington’s tax loopholes. One such loophole allows thousands of Oregonians to escape paying our sales tax when they shop in Vancouver. … (Under the proposal,) Oregon and other out-of-state residents will owe the sales tax initially. However, these folks can apply to our Department of Revenue for a remittance of Washington sales taxes paid in the previous calendar year.”