BILL REQ. #:  H-1649.3 

Read first time 02/13/09.   Referred to Committee on Finance.

     AN ACT Relating to clarifying that tax expenditures are excluded from the requirements for raising taxes under the state revenue limitations; reenacting and amending RCW 43.135.035; and creating a new section.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION.  Sec. 1   It is the intent of the legislature to clarify the ambiguity that exists regarding the definition of the phrase "raises taxes" in the law. The legislature finds that chapter 1, Laws of 2008 does not address the issue of tax expenditures. The legislature further finds that the Washington state supreme court decision in Western Petroleum v. Friedt held that the repeal of a tax credit or tax exemption that relieved certain taxpayers from paying the full amount of an existing tax was not an increase in an existing tax. Therefore, the legislature further finds that the act of eliminating a tax exemption, credit, or other tax expenditure is clearly distinct from the act of raising taxes and may not be construed as such.

Sec. 2   RCW 43.135.035 and 2008 c 1 s 5 (Initiative Measure No. 960) and 2007 c 484 s 6 are each reenacted and amended to read as follows:
     (1) After July 1, 1995, any action or combination of actions by the legislature that raises taxes may be taken only if approved by a two-thirds vote of each house of the legislature, and then only if state expenditures in any fiscal year, including the new revenue, will not exceed the state expenditure limits established under this chapter. Pursuant to the referendum power set forth in Article II, section 1(b) of the state Constitution, tax increases may be referred to the voters for their approval or rejection at an election.
     (2)(a) If the legislative action under subsection (1) of this section will result in expenditures in excess of the state expenditure limit, then the action of the legislature shall not take effect until approved by a vote of the people at a November general election. The state expenditure limit committee shall adjust the state expenditure limit by the amount of additional revenue approved by the voters under this section. This adjustment shall not exceed the amount of revenue generated by the legislative action during the first full fiscal year in which it is in effect. The state expenditure limit shall be adjusted downward upon expiration or repeal of the legislative action.
     (b) The ballot title for any vote of the people required under this section shall be substantially as follows:

     "Shall taxes be imposed on . . . . . . . in order to allow a spending increase above last year's authorized spending adjusted for personal income growth?"

     (3)(a) The state expenditure limit may be exceeded upon declaration of an emergency for a period not to exceed twenty-four months by a law approved by a two-thirds vote of each house of the legislature and signed by the governor. The law shall set forth the nature of the emergency, which is limited to natural disasters that require immediate government action to alleviate human suffering and provide humanitarian assistance. The state expenditure limit may be exceeded for no more than twenty-four months following the declaration of the emergency and only for the purposes contained in the emergency declaration.
     (b) Additional taxes required for an emergency under this section may be imposed only until thirty days following the next general election, unless an extension is approved at that general election. The additional taxes shall expire upon expiration of the declaration of emergency. The legislature shall not impose additional taxes for emergency purposes under this subsection unless funds in the education construction fund have been exhausted.
     (c) The state or any political subdivision of the state shall not impose any tax on intangible property listed in RCW 84.36.070 as that statute exists on January 1, 1993.
     (4) If the cost of any state program or function is shifted from the state general fund or a related fund to another source of funding, or if moneys are transferred from the state general fund or a related fund to another fund or account, the state expenditure limit committee, acting pursuant to RCW 43.135.025(5), shall lower the state expenditure limit to reflect the shift. For the purposes of this section, a transfer of money from the state general fund or a related fund to another fund or account includes any state legislative action taken that has the effect of reducing revenues from a particular source, where such revenues would otherwise be deposited into the state general fund or a related fund, while increasing the revenues from that particular source to another state or local government account. This subsection does not apply to the dedication or use of lottery revenues under RCW 67.70.240(3) or property taxes under RCW 84.52.068, in support of education or education expenditures.
     (5) If the cost of any state program or function and the ongoing revenue necessary to fund the program or function are shifted to the state general fund or a related fund on or after January 1, 2007, the state expenditure limit committee, acting pursuant to RCW 43.135.025(5), shall increase the state expenditure limit to reflect the shift unless the shifted revenue had previously been shifted from the general fund or a related fund.
     (6) ((For the purposes of chapter 1, Laws of 2008,)) The definitions in this subsection apply to this section.
     (a) "Raises taxes" means any action or combination of actions by the legislature that increases state tax revenue deposited in any fund, budget, or account, regardless of whether the revenues are deposited into the general fund. "Raises taxes" does not include repealing, reducing, or otherwise eliminating a tax expenditure, for an existing tax.
     (b) "Tax expenditure" means an exemption, exclusion, or deduction from the base of a tax; a credit against a tax; a deferral of a tax; or a preferential tax rate.