Washington’s $200 million question: taxes or more cuts?

OLYMPIA — State lawmakers crossed the halfway point of the special session this week with House and Senate Democrats still split on how they want to raise taxes.

Democrats, who hold majorities in both chambers, agree on an amount, $800 million, but not on how to generate all of those dollars.

They’re deadlocked on about a quarter of that sum, with the Senate saying it should come from a higher sales tax and the House disagreeing. That chamber is pushing an end to tax breaks for large banks, out-of-state residents and buyers of custom-made software programs.

As the Legislature begins the session’s 17th of the allotted 30 days, why don’t Democrats simply cut $200 million in spending and go home rather than wrangle longer on taxes?

Even Democratic Gov. Chris Gregoire has proposed more cuts and fewer taxes.

“As long as they don’t seem to be able to agree on taxes, it would be a pleasure to see them put the same kind of effort into finding $200 million in reductions,” said Richard Davis, coordinator of the Washington Alliance for a Competitive Economy.

Business-oriented think tanks and Republican lawmakers view the stalemate as an opportunity to act on cost-cutting measures like closing the state printer and reopening the contracts of public employees to restructure pay and benefits.

“To us, it’s a no-brainer,” said Jason Mercier, government reform director for the Washington Policy Center. “You’ve got to close the gap with spending reductions. Here’s the opportunity.”

House Majority Leader Lynn Kessler, D-Hoquiam, acknowledged Tuesday it is “certainly a strategy that could be discussed. We’re not ready yet to cross the bridge to a smaller revenue package.”

In fact, late Tuesday she spoke optimistically of a “different option that we think will get us out of here.”

She wouldn’t disclose details, saying only the Senate may discuss it Thursday and the House on Friday.

Democratic leaders are fixed on making roughly $800 million in cuts to help erase the $2.8 billion deficit and balance the budget that runs through June 30, 2011. The rest of the gap is to be plugged with reserves, transfers and anticipated tax revenue.

To cut another $200 million will harm the state’s public school system and safety net of human services when education and assistance are most needed, they said.

“We understand that we can’t afford any of those kinds of cuts,” House Speaker Frank Chopp said last week. “So we’re working very hard to resolve this thing as soon as possible.”

Unions and groups representing teachers, health care workers and human service providers are pushing Democrats to come up with as much money as possible, arguing that the sum of the cuts will impede the state’s economic recovery.

“It’s not just, ‘they’re at impasse, let’s cut more and walk away,’” said Remy Trupin, executive director of the Washington Budget and Policy Center. “If it takes a little longer to develop a budget that does truly reflect Washington values, I think it is OK for the state.”

Republican lawmakers are exceedingly frustrated at the path Democrats are on.

“We have all along been giving solutions. It’s frustrating to me that the only solution they’re looking at is tax increases,” said Rep. Norma Smith, R-Clinton. “That’s shameful in this economy.”

Jerry Cornfield: 360-352-8623, jcornfield@heraldnet.com.

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