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Originally published Thursday, March 28, 2013 at 3:33 PM

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Gov. Inslee proposes extension of temporary taxes

Gov. Jay Inslee unveiled his budget proposal Thursday, laying out plans to make some temporary taxes permanent and to end some tax exemptions to address both the state's projected budget deficit and a court-ordered requirement to put more money into the state's basic education system.

Associated Press

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The states definition of temporary in the dictionary is: See Permanant. There is no... MORE

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OLYMPIA, Wash. —

Gov. Jay Inslee unveiled his budget proposal Thursday, laying out plans to make some temporary taxes permanent and to end some tax exemptions to address both the state's projected budget deficit and a court-ordered requirement to put more money into the state's basic education system.

Inslee seeks to raise some $1.2 billion from tax changes, with more than half of that coming from permanently extending business and beer taxes that were about to expire. The rest of the money would come from eliminating or lowering tax exemptions, raising new money from bottled water sales, trade-in vehicles and sales taxes on non-residents.

The non-resident sales tax exemption has been around for decades, designed to help retailers - particularly those along the Oregon border - stay competitive with states that don't have a sales tax. The beer tax surcharge - previously imposed only on large brewers - would be expanded to small brewers as well.

"I believe we should all choose education over tax breaks and to make good on our constitutional and moral duty to quality schools for our children," Inslee said, joined by several students from Cleveland High School in Seattle. "It is our duty and we will do it."

Senate Republican Leader Mark Schoesler said that while he shares the governor's view that money must be pumped into K-12 and higher education, he said those funds should be raised through cuts elsewhere in the budget, and not by increasing tax revenues.

"A tax is a tax is a tax, whether it's extending a temporary one, whether it is defining the verbiage, it's still a tax," he said.

Democratic Rep. Ross Hunter, chair of the House Appropriations Committee, said in a written statement that "it is very appropriate for us to look at the value of return we're getting from some tax loopholes that have been on the books, without review, for decades."

Inslee first indicated his support for the idea of extending temporary taxes in January, saying that he didn't consider the move a tax increase, which he has said he opposes. At the time, he said the idea was one of many that lawmakers need to be open to as they work to balance the budget, and it was one that former Gov. Chris Gregoire proposed in her budget proposal in December.

Lawmakers, who in the midst of a 105-day legislative session, are tasked with patching a projected deficit of more than $1.2 billion for the next two-year budget ending in mid-2015.

That doesn't include money lawmakers will need to spend to improve funding for education as directed by the state Supreme Court earlier this year.

Inslee proposed the state make a $1.2 billion down payment in this two-year budget. That amount includes nearly $280 million on programs to expand preschool programs, expand full-day kindergarten and reduce class sizes for kindergarten and first grade for high-poverty schools.

In higher education, Inslee would allow further tuition increases at the University of Washington and Washington State University - as much as 5 percent per year. Tuition at other state universities would go up as much as 3 percent a year, while tuition at community and technical colleges would remain steady for the next two years.

A recent proposal by a Senate coalition would have added money to the system and ordered a tuition decrease of 3 percent, although the Senate has yet to fully release its budget.

Inslee expressed optimism, saying that Republicans may change their thinking as they complete their budget proposal.

"Things do evolve when you really have a cold reality check on the numbers," he said.

Inslee would separately add tax benefits for those in the clean energy sector, high-growth industries and businesses who hire veterans. Inslee's plan would increase government spending by more than 10 percent from the current budget cycle to the next one.

Inslee calls for the state to once again suspend voter-approved cost-of-living raises for teachers, saving $321 million. He also proposes to save some $20 million by changing how the state assesses K-12 students. He also proposes a one-time $8.9 million reduction on litter prevention and waste reduction programs.

Part of his proposal reduces the tax break on business and occupation taxes by 25 percent for all industries except aerospace and those charged with radioactive waste cleanup by the federal government. Also, a 3 percent pay cut state workers saw would be restored.

Inslee also moves forward with Medicaid expansion in his budget, which he says will save the state nearly $300 million.

On Wednesday, leaders with the Republican-dominated coalition in the state Senate said they plan to adopt the Medicaid expansion as part of a budget proposal expected next week.

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AP writer Jonathan Kaminsky contributed to this report.

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