While the legislature has made cuts in some areas and reduced the growth rate in others, there is still somewhere between $700-$800 million to fill with either new taxes or tax increases.  Some would argue that the legislature has not cut enough and others who believe that taxes should be raised by $1 billion or more.

While the problem of balancing the budget is obvious, the solution is not.  What is also obvious is that without true spending reform and a renewed focus of the “Priorities of Government” originated under Gov. Gary Locke, this problem with be with us next year and the year after that.

K-12 education is the only constitutional requirement for spending—everything else is literally discretionary but once programs are put into place, especially social services and health care, they are virtually impossible to ever eliminate, much less reduce.  The political pressure from advocates and unions is incessant.  If you visit Olympia you will see green or purple shirted advocates roaming the halls asking for more money and advocating tax increases while lobbyists of all stripes (or pin stripes) attempt to prevent higher taxes or additional regulations.  In a word, the system is broken.

One of the more creative ideas to help fill the budget gap is to impose a sales tax on custom software programming.  See previous posts for further details on this proposal that originated in the House of Representatives. 

WTIA, its members and the broader tech community have weighed in heavily against this ill-advised idea but the desire for more tax money is driving the legislative leadership to keep this proposal alive.  The legislature is under a great deal of pressure to finish the budget and raise taxes as soon as possible. 

The House and Senate are negotiating over both spending and taxes and the custom software sales tax is a juicy target because it aims to raise $76 million this biennium ending June 30, 2011 and $180 million next biennium.

The Senate proposed a .3 percent sales tax increase along with a .25 percent increase in the B&O tax on services for three years to help close the budget gap.  The House refuses to consider any kind of sales tax increase.  But if the Senate accepted the House’s proposal to tax candy and gum ($30 million) and the House accepted a .2 percent sales tax increase, it would close the gap without killing an inordinate amount of jobs.  The House tax package also includes a .5 percent increase in the B&O tax on services (1.5 to 2.0%)

WTIA will continue to keep working against the sales tax on custom software and a B&O increase.  WTIA has not taken a position on any tax increase and believes that the legislature needs to work harder on controlling spending to prevent another big budget problem next year.

Please continue to contact your legislator at 800-562-6000 to express your opposition to the sales tax on custom software.  You can find your legislator here:  http://apps.leg.wa.gov/DistrictFinder/Default.aspx

Thank you for your support and help on this critical issue.