Sales-tax increase off the table in Washington budget talks

OLYMPIA - Senate and House Democrats moved closer Wednesday to a tax-package deal - one that doesn't include a sales-tax increase.

Senate Majority Leader Lisa Brown, D-Spokane, confirmed that a sales-tax increase was not in the newest compromise tax plan being considered by lawmakers. She said the revenue package remains at the previously targeted level of about $800 million.

House and Senate Democratic leaders were counting votes on the newest offer, which emerged after meetings with Gov. Chris Gregoire. The evaporation of a sales-tax hike raised hope that lawmakers could resolve an impasse that has dragged the current 30-day special session within a week of its final deadline.

Democratic leaders have struggled to agree on a revenue package to help balance the state budget's projected $2.8 billion deficit through June 2011.

Sources who had been briefed on the package discussed by lawmakers Wednesday afternoon told The Associated Press that it included a 2 cents-per-can tax on soda, along with a higher tax on major-brand beer, and extension of the sales tax to candy and gum. Local candy companies would get some aid in the form of a tax credit, these sources said.

The sources spoke on condition of anonymity, citing the sensitive nature of ongoing negotiations within Democratic caucuses.

They also said the beer and pop taxes were proposed as temporary levies, as was a business-tax rate increase for service businesses, which appeared to be higher in Wednesday's proposal than a previously discussed 0.25 percentage-point increase.

The package discussed Wednesday afternoon did not include previous proposals to increase taxes on banks' mortgage interest, out-of-state retail shoppers, and custom software products, they added.

Those three elements had been supported by House Democrats, while the abandoned sales-tax hike was favored by Senate Democrats.

Also included in the package discussed Wednesday were several elements previously agreed to by both chambers, including extension of the sales tax to bottled water and a rewriting of the tax code aimed at collecting more money from businesses based outside Washington, the AP sources said.

Brown, House Speaker Frank Chopp, D-Seattle, and Gregoire met late Wednesday afternoon to discuss the compromise, but Chopp and Brown slipped out a back door to avoid reporters.

Chopp's spokeswoman, Melinda McCrady, said Chopp planned a conference call with several House members Wednesday night, but that no official agreement would be announced before today.

Gregoire's spokeswoman, Karina Shagren, said that the governor wouldn't comment on what was said in the meeting, but "she's still optimistic that a deal is going to be brokered and is confident the speaker and majority leader will do what they need to do to reach an end."

Lawmakers have agreed on the general outlines of a budget-balancing plan that combines spending cuts, federal bailouts and one-time accounting maneuvers with about $800 million in tax increases.

But the details of how to build that tax package have vexed legislative leaders and Gregoire all year, pushing their budget work into the special session that expires next Tuesday.

Gregoire, who also is a Democrat, said earlier Wednesday that the newest offer was not what either chamber or she had wanted. Her message to lawmakers: "I'm not asking that you love it. I'm asking that you pass it, so we can get out of town."

The previous significant movement in tax negotiations came Monday, when Senate Democrats offered a new proposal that hiked taxes on mass-market beer - microbrews would be exempt - but kept an increase in the state sales tax.

House officials and Gregoire, however, have been firm in their opposition to a sales-tax increase. Gregoire also has threatened that she could be forced to make across-the-board spending cuts of 20 percent if lawmakers couldn't come to an agreement in the current special session.

Sen. Ed Murray, D-Seattle and the Senate majority caucus chair, has said that the negotiating process had been moving slowly.

"You go back and forth on proposals," he said. "You go back to your caucus and you move little bit here and move a little bit there. Ultimately, nobody is going to be happy."