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Wash. Dems back away from business tax extension

Mike Baker, Associated Press

OLYMPIA, Wash. (AP) -- Democrats in the Washington Legislature are backing away from a plan that would have raised money by extending a business tax, as lawmakers sought an elusive budget compromise Wednesday in the final week of an overtime legislative session.

Under the revised spending plan, the Democrats would still add nearly $1 billion to the state's education system. About one-quarter of that money would come from a plan to eliminate or narrow tax preferences, such as requiring nonresidents to apply for sales tax refunds instead of getting them automatically.

Senate leaders have balked at any sort of tax increases, particularly the extensions of a temporary business tax. Extending the tax would have raised some $500 million over the next two years. Democrats said their plan was an effort to find a compromise.

"This is a very large move in that direction," said Democratic Rep. Ross Hunter, the top budget writer in the House.

Democrats say the less ambitious tax plan means they won't be able to add as much money to the education system as they would have liked. The budget also includes some creative tactics. It includes a nearly $400 million transfer from the capital budget for public works projects and it saves $140 million from changes to the schedule in how money is dispersed to local school districts.

Senate Majority Leader Rodney Tom, D-Medina, said in a short statement that he was disappointed by the House budget proposal but did not specify which portions he was concerned about.

"We in the Senate will continue to work with our House colleagues to seek a workable compromise, but we will not let political expediency stand in the way of fulfilling our obligation to provide for our schools," he said in the written statement.

Along with differences on taxes, the Senate is also pushing a variety of changes to policy, such as alterations to the worker's compensation system and a plan to create a 401(k)-style retirement system that state workers could use instead of a pension.

Lawmakers are in the final week of their special legislative session focused primarily on the budget. They have been struggling to find agreement on a spending plan that would balance the budget while also adding money to the education system in response to a state Supreme Court ruling.

A separate Supreme Court ruling is also on the minds of lawmakers. Democrats have assumed in their budget that lawmakers will change the estate tax law in response to a court ruling that determined that married couples could avoid the estate tax if they used a certain trust. The House wants to extend the estate tax to everyone, but Senate leaders have been looking to make long-term changes to the estate tax in the process.