Oregon Public Broadcasting

In the Washington legislature, majority Democrats are looking for tax loopholes to close to balance the budget. But they're finding that's easier said than done.

Take the example of the tax exemption for gold and silver bullion. The Governor wants to repeal it, but it appears that buyers and sellers of precious coins can relax.

Austin Jenkins reports.

During her 2004 campaign for governor, Democrat Chris Gregoire often talked about closing tax loopholes. And over-and-over again she singled out one in particular.

Chris Gregoire: "And that's golden bullion dealers. Now I don't know whether they should have their $150,000 tax exemption. But I do know we ought to review it and ask that question and hold them accountable."

Since 2004, the price of gold has tripled. Now the state Department of Revenue estimates the tax loophole is costing the state about $2 million a year.

Gregoire never did tackle the gold bullion tax break in her first term. But this year she is.

Gregoire's Revenue department is pushing legislation to repeal the sales tax and business and occupation tax exemptions for precious metal coins and bars. At a hearing on the bill, coin shop owners said they work on profit margins of between one and three percent.

Dealer Karen Feldman said that's why having to pay new taxes would be devastating.

Karen Feldman: "Without this exemption investors and collectors will travel to tax exempt states like Oregon and Idaho. They will also go to the Internet and phone. This will cost the state jobs and loss of revenue."

The coin shop owners argue that when people buy these precious metals, it's an investment like buying stock and should be treated as such.

Representative Ross Hunter chairs the House Finance Committee. He sponsored the repeal bill as a courtesy to the Department of Revenue.

He says it's a good example of a tax exemption that jumps out at people when they scan the state's list of tax breaks.

Ross Hunter: "Everyone who looks at that list says ëthis is crazy, what do you mean they get a sales tax exemption for gold bullion, that's just nuts."

But Hunter, who is definitely looking for tax loopholes to close this year, says there's often a good reason for even the craziest sounding tax breaks. After hearing the testimony of the coin dealers, he's pretty much convinced that the ones for gold bullion should stand.

A spokesman for the Washington Department of Revenue says the agency now plans to amend its proposed repeal.

Under the amended bill, coin dealers would have pay Business and Occupation tax, but not have to charge sales tax to customers.